“Buy now, pay later” loans were originally promoted as a way to help consumers afford small purchases, such as electronics and clothing. Now, financial firms are also pushing the loans as a means for people to cover essential expenses, such as rent, groceries, electricity bills and even medical costs.
Consumer advocates warn that using BNPL loans for daily necessities and other critical expenses is risky, noting that lenders sometimes obscure the potential costs of these short-term loans. A recent poll from Protect Borrowers, a nonprofit advocacy group that investigates financial abuses, found that many BNPL users report using the loans for essentials, including for rental or housing costs.
Ariel Nelson, senior attorney at the National Consumer Law Center, a nonprofit advocacy group that supports economic justice for low-income people, said the growing usage of BNPL loans for rent and other necessities underlines how many Americans, depleted in recent years by high inflation, are struggling with the cost of living.
“The most helpful thing about them is what they reveal about the state of affordability — or unaffordability — in our country, which is that people are struggling to pay rent and utilities on time and in one amount,” Nelson told CBS News. “At best, [BNPL loans] can act as a temporary Band-Aid. Even then, they are not risk-free.”
Growing dependence
BNPL loans first became available in the 2010s before gaining traction with consumers in the early 2020s. The loans allow consumers to divide larger purchases into smaller interest-free payments, typically in four installments over a few weeks or months.
A major reason for their popularity is that borrowers can get a loan on the spot at checkout, online or in stores by providing basic information and without a credit check.
Most BNPL lenders make money by charging a fixed monthly fee, plus a percentage of the loan amount. Often, the products don’t charge late fees, although many lenders will decline applications for a new loan if a customer has previously been late on payments.
As a financial innovation, BNPL loans have been a huge hit, highlighting strong consumer demand for short-term installment loans available right at the point of sale. In 2025, Americans borrowed $160 billion in BNPL loans — roughly double the amount from two years earlier, according to research by Federal Reserve economists. More than $96 billion in loans was issued without interest, according to the report.
More than half of those borrowers — 54% — say they wouldn’t be able to make ends meet without the loans, according to a recent survey from LendingTree, an online lending marketplace.
While users initially leaned on the loans to make “stretch” purchases like designer clothing or gaming consoles, consumers are now increasingly relying on them to cover necessities, Matt Schulz, chief credit analyst at LendingTree, told CBS News.
“BNPL lenders have done a really good job of making these types of loans accessible to pay for almost anything,” he said.
Nearly 30% of BNPL users said they had used the products to pay for groceries, up from 14% two years ago, according to the LendingTree survey. Another 23% of respondents reported using a BNPL loan to pay for medical, dental or veterinary expenses, or for rent.
“Theoretically, if you can make the payment by the due date and there are no additional financing costs, sure, it could help,” Jennifer Zhang, a policy, research and data analyst at Protect Borrowers, told CBS News. “But they can be packed to the brim with late fees and junk fees that can snowball and become a source of financial distress for many people.”
Flexibility for borrowers or risky debt trap?
Affirm, a San Francisco-based BNPL lender, in January launched a pilot that lets renters split their monthly payments into two installments through a partnership with Esusu Pay, a flexible rent payment provider. The companies say the service gives renters flexibility while ensuring landlords are paid on time.
Although the loans are interest-free and incur no late fees, customers who want the ability to pay their rent in two installments must purchase a membership costing between $35 and $50 per month.
Neither Affirm nor Esusu responded to a request for comment on claims that BNPL loans can be costly for consumers.
Consumer advocates say BNPL products can drive consumers deeper into debt, especially when borrowers take out multiple loans from different providers with overlapping repayment periods. For example, because BNPL loans are repaid through automatic withdrawals from a person’s bank account, loan payments can quickly drain a borrower’s funds and trigger an overdraft fee.
“The products are structured so they seem like they’re low cost, but actually they’re not low cost,” said Nelson of the National Consumer Law Center. “They can include a monthly membership or subscription fee, come with late and processing fees, and users might face overdraft or insufficient funds fees.”
“We’re selling time”
Another lender, New York-based Flex, offers loans that allow customers to split their rent, utilities, phone, internet and car payments into smaller installments.
Borrowers pay a standard $6 monthly fee to split their rent payment in two, plus 3% of the loan amount and a 0.5% processing fee. For example, a customer whose rent is $1,500 a month would typically pay between $30 and $40 per month for the loan, Flex told CBS News.
Flex, in turn, pays its customers’ landlord in full on the first of the month, or whenever their rent is due. Ryan Metcalf, vice president of public affairs at Flex, described the loan as a way for consumers to buy time.
“It is for renters who have a timing mismatch, because when they are paid doesn’t always match up with what rent or other essential bills are due,” he told CBS News. “We’re not selling money, we’re selling time.”
Schulz of LendingTree said that, like most financial tools, BNPL loans can help with budget management, but only if consumers use them wisely.
“It can be really good because it’s interest-free and predictable, but you can get out over your skis pretty easily,” he said, noting that the loans are easy to get, which makes it easy to overspend.
“If you are somebody who doesn’t have a lot of experience with credit and managing these sorts of things, it can be a real challenge,” Schulz added.
