Comment on I got that dept in me

lazylion_ca@lemmynsfw.com ⁨10⁩ ⁨months⁩ ago

• HappyTimeHarry@lemm.ee ⁨10⁩ ⁨months⁩ ago

  All the risks of late payment fees and harming your credit score if you miss a payment, with none of the beneifits of raising your score if you pay on time.

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• cm0002@lemmy.world ⁨10⁩ ⁨months⁩ ago

  BNPL splits the transaction evenly every other week or in some cases, every month. There’s typically no interest or even fees in some cases (Zip)

  BNPL can be good, it can also be as bad as any other debt can be.

  Because they’re typically interest free, it’s essentially “free” money. For example, let’s say you have a big purchase you want to make of $500, you can afford this purchase out right because you saved money for it. But you can also afford to have 4 payments of 125$ every 2 weeks direct from your paycheck.

  It’s better to take the split, and keep that 500 in savings for numerous reasons from generating interest to keeping it for rainy days.

  Now ofc there’s caveats, like everything there’s nuance. Like every other type of credit, whether it’s complimentary to your finances or devastating to it depends on your impulse control, financial literacy, planning and reasons for using that credit.

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  • sp3ctr4l@lemmy.dbzer0.com ⁨10⁩ ⁨months⁩ ago

    While there is no interest charged on your BNPL … payment plan, micro loan, whatever you call it…

    Making the payments on time does not help your credit scores. BNPL deals do not count as on time payments made, they don’t count as an expansion of your total available credit, nor your current debt to total credit limit, number of accounts you have, etc…

    But if you don’t pay them, and you go into collections on them, now they massively hurt your credit.

    And if you do, say, suddenly become very injured and miss work, can’t make payments… well now you may have many, many, many defaults on all those different BNPL agreements.

    Whereas, if the same thing happened, but you only had maybe 1 or 2 credit cards with larger total credit limits, well, that would still be bad for your credit, but probably not as bad as if you had ten or tens of concurrent BNPL agreements you’d been overlapping and chaining.

    Also, I am not 100% sure about this, but I am fairly confident that, generally speaking, most credit cards will give you 3 months of missed minimum payments before they send you to collections, whereas BNPL agreements can be… twice a month, once a week, and can trigger giant penalties for you if you miss even one… and then those chain and they can send you to collections even faster.

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  • LilB0kChoy@lemm.ee ⁨10⁩ ⁨months⁩ ago

    Now ofc there’s caveats, like everything there’s nuance. Like every other type of credit, whether it’s complimentary to your finances or devastating to it depends on your impulse control, financial literacy, planning and reasons for using that credit.

    That’s a lot of words to say don’t spend money you don’t have.

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    • Kecessa@sh.itjust.works ⁨10⁩ ⁨months⁩ ago

      If you take the time to read what they’re saying it’s actually 100% logical to spend money you don’t have in some cases.

      Ex: getting a new mortgage on a house that’s paid for in the middle of COVID while interest rates are super low to invest it at a higher % than the mortgage.

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      • LilB0kChoy@lemm.ee ⁨10⁩ ⁨months⁩ ago

        Your example isn’t equivalent. BNPL does not require collateral. BNPL is, in general, predatory. Some people may take advantage of it the way OP described but they’re the exception, not the rule.

        That’s why there are articles like this, and this and this.

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    • cm0002@lemmy.world ⁨10⁩ ⁨months⁩ ago

      Again, nuance, you can take out debt for money “you don’t have” as long as you can comfortably afford it

      My 500 in savings was an example, but if you didn’t have that saved up, there’s nothing wrong with putting it on BNPL because again, there’s typically no interest.

      Functionally, there’s not a whole lot of difference between splitting it into 4 125$ payments on your paychecks, or stashing 125$ from each paycheck to savings.

      Biggest difference is committal, one way you are committed to paying that 125, the other you can skip if you need to (though there are BNPL services that do allow you to “skip” (read: defer) a payment without penalty) But again that goes back to an individuals financial literacy, planning, impulse control and security that you’ll have your job the whole time

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      • LilB0kChoy@lemm.ee ⁨10⁩ ⁨months⁩ ago

        as long as you can comfortably afford it

        That’s not who BNPL targets.

        Functionally, there’s not a whole lot of difference between splitting it into 4 125$ payments on your paychecks, or stashing 125$ from each paycheck to savings.

        There is, though. Spending the $500 you have in savings is an even exchange. Money for goods/services.

        Spending money you don’t have through BNPL means you’re exchanging a ‘promise to pay’ or an IOU for goods and services. What happens if you don’t pay on time? How much more than the actual purchase price will it cost?

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