Washington D.C — On Monday, The New York Times detailed how “buy now, pay later” loans that once helped shoppers finance luxurious retail purchases are increasingly being used by Americans to cover basic household needs, including rent, electricity, health insurance, mortgages and water bills. With costs continuing to rise thanks to Republican policies like tariffs, the unpopular war in Iran and massive cuts to health care and SNAP, more working families are struggling to keep up with the cost of everyday life, and more households are being pushed to borrow simply to pay for basic necessities.
Families across the country are paying $3,500 more on average since the beginning of last year thanks to Republican policies. Now, according to the article, half of the borrowers surveyed said they could not make ends meet without pay-later loans, with a quarter saying they had at times carried three or more pay-later loans at once. For working Americans, these loans are no longer about buying something they want, but about a way to keep the lights on, cover health care costs and make it through another month.
“With grocery prices and everyday expenses getting harder to afford, I’ve had to turn to pay-later services myself just to keep up with my bills. This is what rising costs look like. Even people supporting their communities are being squeezed and pushed to borrow,” said Amanda G., a Nebraska resident who volunteers to connect people with food pantries. “Republicans in Congress must stop making an already unaffordable economy harder on working families and start putting their priorities where they belong: lowering everyday costs so that families can cover the basics without another loan.”
The New York Times: ‘Buy Now, Pay Later’ Lenders Pitch Loans for Needs Like Electricity and Rent
Key Points:
- Now, lenders are offering the loans as a means for people to finance basic households needs.
- The lending apps Flex and Zip allow customers to take out loans to pay for their broadband, electricity, health insurance, mobile phone service, mortgage and water bills. Affirm, one of the most popular pay-later apps, has started providing some tenants loans to extend their monthly rent payment for a few weeks.
- The rise in pay-later financing comes as many households are leaning more on debt to keep up with their daily expenses. Paying interest — to afford basic needs — adds to the overall cost of living, which has already been rising amid higher medical, housing and fuel costs.
- Americans spent $160 billion last year through pay-later loans, according to research released recently by Federal Reserve economists — nearly twice what consumers spent two years earlier, in 2023.
- For many borrowers, the loans have become their only option: Half of those using them said they could not make ends meet otherwise, according to the latest edition of a survey that LendingTree, a loan marketplace, has compiled for years.
- But the pay-later loans can also become debt traps, especially when borrowers stack them up. A quarter of those surveyed by LendingTree who use the loans said they had at times had three or more loans outstanding at once. And because pay-later loans often pull their payments directly from customers’ bank accounts or debit cards, one mistimed withdrawal can set off a cascade of overdraft fees and other missed payments.
- Ashley Reed, 40, initially used pay-later loans for small indulgences. Then a family emergency upended her finances: Her mother had a brain aneurysm, hours away from their home in Baltimore. Ms. Reed maxed out her credit cards paying for emergency care, including an ambulance trip not covered by insurance and a hotel room near her mother’s hospital.
- Flex describes its fixed fees as a simple and safe system: It does not charge late fees or compounding interest, and customers cannot borrow again until their rent debt is paid off.
- But even the lenders themselves acknowledge that their products — and their rapid growth — are a sign of the growing economic strain many households face.
- “We can’t solve income, or the price of rent and affordability,” said Ryan Metcalf, Flex’s vice president of public affairs. “What we can help people solve is a timing issue. It’s harm reduction.”
To learn more about the campaign, visit UnrigOurEconomy.com or contact press@unrigoureconomy.com
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About Unrig Our Economy
Unrig Our Economy is a national campaign to fix the rules of our economy to make it work for working people. We know that when the middle class does well, all of us do well — which is why we’re fighting on behalf of working Americans and holding corporations, their wealthy executives, and the politicians who enable them accountable.