Nearly 78M Americans Used Buy Now, Pay Later and Pay Later in the previous year.
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More than 78 million Americans Used Buy Now, Pay Later, and Buy Now in the past year.
NERDWALLET 2022 PERSONAL LOANS REPORT
Written by Elizabeth Renter Senior Writer/Spokesperson | Analysis of data, Personal Finance, economics Elizabeth Renter spends her time hunting for consumer takeaways in datasets and crunching numbers for all things personal financial. She has had her work cited by The New York Times, The Washington Post, the “Today” show, CNBC and elsewhere. Before becoming a member of NerdWallet as of the year 2014, she worked as an independent journalist. When she’s not engaging in math and words, Elizabeth enjoys traveling, lifting weights and restoring the beauty of her Victorian home. She lives in Clay Center, Kansas.
October 11 Oct 11, 2022
Editor: Kim Lowe Lead Assigning Editor The consumer lending Kim Lowe leads the personal loans editorial team. She was hired by NerdWallet in the last 15 years, after managing the content on MSN.com which included food, health and travel. Her first job was as a journalist for publications covering mortgages as well as the restaurant, supermarket and mortgage industries. Kim obtained her bachelor’s degree in journalism at The University of Iowa and a Master of Business Administration from the University of Washington.
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When your car fails to start or your utility bill increases, you find the funds to cover these expenses. If the money doesn’t come in, you can turn to other, sometimes more expensive options.
The majority of Americans are likely to use credit cards in order to settle their bills and pay for other household expenses in tough economic times, if they did not have cash in their wallets Others would look to alternative sources that are more modern and innovative in the wake of an NerdWallet research of 2,065 U.S. adults conducted Aug. 4-8 online by Harris Poll.
According to the study, 14% are likely to use “buy now pay later” services, and 11% would turn to mobile cash advance apps to pay bills and cover other household expenses in tough economic times.
“Buy now and pay later” isn’t only for clothes and shoes. People use these services for necessities like food, gas and health-related costs,” says Annie Millerbernd the NerdWallet’s expert on personal loans. “They appear to be an easy option to cover the essentials if you’re not able to pay cash. However, problems arise when you can’t actually pay them off later.”
Within the past year thousands of Americans have turned to these new financial tools and the smallest of adults are often leading the charge according to the survey.
Editor’s note: In the report, when discussing what sources of financing Americans will most likely utilize in times of economic hardship, we are referring to sources they’d most likely utilize to pay for bills and pay for other household expenses if they didn’t have money in their bank account to cover these expenses.
The key conclusions
Credit cards are a staple but buying now and pay later can also be a source during trying economic times. The majority of Americans (50 percent) are most likely to use credit cards to pay for bills and other household expenses in tough economic times, when they don’t have cash in their wallets. Certain people would choose to use newer financing options 14% are more likely to utilize buy now or pay later options, and 11% would utilize cash advance mobile apps to pay costs and bills during these economic times, according to the study.
Many have used buy-now and pay later services in the last year. More than the 78-million Americans (30 percent) have used buy now, pay later in the last 12 months, the survey found. In the survey, they’ve used it six times on average.
Mobile cash advance apps offer millions of Americans money fast. About 49.2 million Americans (19%) have utilized apps for cash advances on mobile devices in the last 12 months. Like BNPL the apps are particularly popular among younger generations: 38 percent of Gen Z (ages 18-25) and 39 percent of millennials (ages 26-41) have utilized them in the past year, versus 11% among the Generation X (ages between 42 and 57) and 2percent of baby boomers (ages 58-76), according to the study.
More Americans use BNPL than personal loans. Over the last 12 months 24 percent of Americans, or 62 million, have taken out at least one personal loan taking out $5,046, in the average in that time according to the study.
Where Americans can turn in the midst of tough times
50% of Americans (50%) would likely to make use of credit cards to pay for bills and other household expenses if they did not have enough cash on hand to pay for them in times of economic hardship, like a recession, job loss or unexpected costs. The credit card was the second most frequently mentioned financial source according to the survey.
The majority, or 43 percent of Americans, would turn to their emergency savings to cover the costs during these times according to the study. Saving money such as this requires time and enough room in your budget to make it occur. Naturally, not everyone has such savings available.
A chart that shows how different generations responded to the questionnaire, .
“There are many borrowing options for people when they are tight, but credit cards as well as personal loans aren’t without their own strict borrowing conditions,” Millerbernd says. “Buy now, pay later and cash advances are much easier to obtain, but can lead people to overextend themselves.”
Pay later, buy now is once again wildly popular
About 77.7 millions Americans have utilized the internet in the past 12 months, according to the study. The figure is 30% of Americans which is a slight decrease from 37% in the survey we conducted in September 2021.
And they’ve used it frequently around six times during the past 12 months, on average.
Buy now, pay later can be described as an installment loan which is paid at the point of purchase, whether that’s the cash register or online. These types of services enable you to spend more than you typically might because you’re paying just part of the bill at checkout, and they come with the risk of potential fees that are significant, especially in the event of a late payment. Because the loans typically don’t require a hard background check for credit, they might be attractive to those with low credit scores and otherwise wouldn’t qualify for other types of credit.
Half of Gen Z and millennials (50%) and 44 percent from Gen Z have used BNPL in the last twelve months, as per the study. This compares to 25 percent from Gen X and 14% of baby boomers.
49.2M turn to mobile cash advance apps in the past year
Around 49.2 million Americans (19%) have utilized a service within the past 12 months, as per the study.
Mobile cash advance applications often referred to as paycheck advance apps, essentially loan your money out of an future paycheck. These loans have limits, generally up to a few hundred dollars, and some of them include fees for subscriptions or other charges included. Although they can be a quick source of cash in the event of an emergency and you’re not able to access other sources, they can be expensive when you consider the amount borrowed.
As with BNPL, mobile cash advance usage is more frequent among younger generations. 38% of Gen Z and three-quarters of the millennials, 11 percent of Gen X and the baby boomers, 2% have used these apps in the last year.
Additionally, these apps tend to be used by people with less income — 26% of those with a household income below $50,000 and 22% of those who have an income between $50,000 and $74,999 have utilized these apps within the last 12 months, while 15% of those who have household incomes of $100k or higher.
Personal loans are a source of financing to one-quarter of Americans
The personal loans are a long-standing source of money to pay off debts or to purchase new products. They are a fixed-rate loan and interest rates can be very low for borrowers who are qualified. However, the percentage of Americans taking out personal loans is at present lower than the percentage of borrowers who utilize BNPL services, and the two financing sources can at times be used for the same purposes.
In the last twelve months, 62.5 million Americans (24 percent) have taken out at the very least one personal loan, down slightly from 29% in the previous year .
On average, they received $5,046. A full 28% of the borrowers borrowed $5,000 or more in that one-year period.
Time horizon: A way to select your money source
If you’re looking to or need to purchase something, you can do so outright with available cash or a debit or credit card. You can pay in full before the due date. But unexpected expenses and trying financial times can arise and, sometimes, large purchases don’t fit neatly within a budget.
Although all of these sources have you paying them back at some point, thinking about how long it will take to cover the cost is a starting point for selecting the best source.
Short-term finance
If you require money fast and only for a short time frame, you can consider these alternatives. The costs associated with these (including fees and interest could be very high, so you’ll need to commit to a quick payoff and ideally make use of them for necessities and not for wants.
Mobile cash advance applications are useful in the event of an emergency, or in the absence of an emergency account. They can be used to cover a gap in your income or to pay an unpaid utility bill a few days before your paycheck, for example. But be careful: They could make it easier to continue borrowing.
Credit cards: Credit cards are the best way to pay for expenses, provided that you can pay off the entire amount by the monthly due date. If you don’t, and interest charges can quickly accumulate.
Long-term financing
The consolidation of debts and sudden costs — such as the home appliance that fails or car repairs may not require many years to pay however, it will certainly take more than a few weeks.
Credit card with 0% APR If you are eligible for credit cards that offer up to a year of free credit. They can be particularly useful for the transfer of high-interest credit card debt, or for large unexpected expenses. Be sure to pay the balance before the interest-free period is over, or you’ll be charged the interest that accrued during that period also.
Pay later, buy now The terms vary from BNPL company, though some might offer terms that run for a few months or years. One downside: Most do not report timely payments to credit bureaus, so they’ll not help you to build credit.
Sources of funding for the longer term
Sources that allow you to pay off the loan or line of credit over a longer time frame may require credit requirements which short-term alternatives don’t. However, one benefit is the money won’t “cost” you as much , since fees and interest are typically lower.
Personal loan Personal loans may have a high minimum requirement for approval, but they could be an excellent source of large amounts which are paid back over a long period. If you can get them through traditional credit unions or banks You may be eligible for a lower rate when you’re an existing account holders.
401(k) loan: These loans are a way of borrowing against your nest egg and in the event you lose your job and are unable to repay it, your loan may be rescinded and taxed as the result of a withdrawal. However, interest rates can be advantageous and loan amounts generous, and do not require a credit check.
The home equity line of credit or cash-out refinances: Homeowners may utilize additional funding sources by tapping the equity in their homes. This kind of loan can be low-interest, but as with mortgages, it could also put your home’s value in danger if you fail to pay.
“Emerging financing options such as BNPL as well as cash advances applications throw a wrench in the traditional collection of financing options” Millerbernd states. “The most important thing to do when borrowing money is knowing what you’ll pay back ahead of time.”
METRODOLOGY
This survey online was conducted in the U.S. by The Harris Poll on behalf of NerdWallet between Aug. 4-8, 2022 among 265 U.S. adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credibility interval. In this case, the sample data is accurate up to +/– 2.8 percentage points, using the 95% confidence level. To learn more about the methodology of the survey, including weighting variables and subgroup sample sizes, contact Alikay Wood at
Calculations that determine the number of Americans have taken advantage of personal loans Buy nowand pay later; or mobile cash advance apps based on 2021 population estimates taken from census data from the U.S. census.
The question on funding sources used in tough economic times was formulated as “Which of the following are your most likely sources to employ to pay for bills or other household expenses in tough financial times (e.g. recession or job loss, sudden expenses) when that you didn’t have enough cash in your bank to cover these expenses? Please select all that apply.”
Disclaimer
NerdWallet is not liable for, expressly or impliedly, all warranties whatsoever, which includes those of the merchantability and fitness for a specific purpose or whether the article’s information is accurate, reliable or free of errors. Use or reliance on this information is entirely at your own risk and its accuracy and completeness are not guaranteed. The information contained in this article shouldn’t be relied upon or associated with the future performance that of NerdWallet or any of its subsidiaries or affiliates. Statements that are not actual facts are forward-looking statements that involve risks and uncertainties. They are expressed in terms such as “believes,” “expects,” “estimates,” “may,” “will,” “should” or “anticipates” or similar expressions. These forward-looking statements could significantly differ from NerdWallet’s presentation of information to analysts and its actual financial and operational results.
About Elizabeth Renter’s job as a chief writer as well as data analyst for NerdWallet has been mentioned by The New York Times, The Washington Post, CNBC and other sources.
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