Why more shoppers are struggling to repay buy now, pay later loans

More Klarna customers are having trouble repaying their “buy now, pay later” loans, the short-term lender said this week.The disclosure corresponded with reports by lending platforms Bankrate and LendingTree, which cited an increasing share of all “buy now, pay later” users saying they had fallen behind on payments.The late or missed installments are a sign of faltering financial health among a segment of the US population, some analysts say, as the nation’s total consumer debt rises to a record $18.2 trillion and the Trump administration moves to collect on federal student loans.Shoppers who opt to finance purchases through BNPL services tend to be younger than the average consumer, and a study from the Federal Reserve last year said Black and Hispanic women were especially likely to use the plans, which customers of all income levels are increasingly adopting.“While BNPL provides credit to financially vulnerable consumers, these same consumers may be overextending themselves,” the authors of the Federal Reserve study wrote.

“This concern is consistent with previous research that has shown consumers spend more when BNPL is offered when checking out, and that BNPL use leads to an increase in overdraft fees and credit card interest payments and fees.”As Klarna grows its user base and revenue, the Swedish company said its first-quarter consumer credit losses rose 17% compared to the January-March period of last year, to $136 million.A company spokesperson said in a statement that the increase largely reflected the higher number of loans Klarna made year over year.The percentage of its loans at a global level that went unpaid in the first quarter grew from 0.51% in 2024 to 0.54% this year, and the company sees “no sign of a weakened U.S.

consumer,” he said.Buy now, pay later plans generally let consumers split payments for purchases into four or fewer installments, often with a down payment at checkout. The loans are typically marketed a...