Americans use buy now, pay later loans for bills as volume rises

Buy now, pay later providers originated nearly $157 billion of U.S. consumer credit products in 2025, up from almost $116 billion a year earlier, according to Federal Reserve estimates. Surveys from LendingTree and Protect Borrowers indicate the product is moving further into household essentials, raising concerns among credit counselors about late fees, interest charges and repeat borrowing.

A LendingTree survey of 2,000 consumers conducted earlier in July found that 44% of Americans expect to apply for a BNPL loan in the next six months. The same survey found that 13% expect to take out three or more such loans over that period.

BNPL loans typically let shoppers divide a purchase into installments rather than pay the full amount upfront. The common “pay in four” structure requires 25% at checkout and three equal payments over roughly six weeks, often without interest. Other products stretch payments over six to eight weeks or longer and may carry interest, depending on the provider and loan type.

Households are using installment loans for necessities

LendingTree’s March poll of more than 2,000 adults found that 29% of BNPL users had used the loans for groceries, compared with 14% in 2024. The survey also found that 18% had used BNPL for car repairs or maintenance and 13% for rent.

Protect Borrowers, a consumer advocacy group, reported broader use in health and utility spending. A Data for Progress online survey of 1,164 U.S. voters, conducted for Protect Borrowers in early July, found that among 438 respondents who had used BNPL, 42% used it for medical or dental care and 39% used it for utility bills.

CNBC reported the case of Ashley Reed, a 40-year-old paraeducator who also works part time as a radiology assistant. Reed said she began using BNPL frequently after maxing out credit cards while paying caregiving costs after her mother suffered a ruptured brain aneurysm during a vacation, including about $2,500 for an ambulance transfer back to Baltimore. She said she later used BNPL services to cover expenses including groceries.

Jim Triggs, chief executive of the nonprofit credit counseling firm Money Management International, told CNBC that some borrowers turn to BNPL after using up credit card capacity. U.S. credit card debt reached $1.25 trillion in the first quarter, 5.9% higher than a year earlier, according to the Federal Reserve Bank of New York.

Late payments add pressure

LendingTree’s March survey found that 47% of BNPL users had made a late payment in the past year, up from 34% in 2024. Triggs told CNBC that missed payments have become a significant issue among consumers using the products.

Protect Borrowers said interest-bearing installment loans represented more than 37% of annual BNPL issuance in 2026, nearly twice the share in 2021. The group’s report found that late fees on some services can be $7 to $8 per payment, while interest and financing fees can reach as high as 36%.

Mike Pierce, executive director of Protect Borrowers, told CNBC that fees can make a small loan resemble payday-style credit, saying repeated late charges can push the equivalent annual percentage rate to 100% or more.

Industry representatives described BNPL as a useful tool for consumers facing higher costs. Phil Goldfeder, chief executive of the American Fintech Council, said in a statement that consumers are choosing payment options with flexible terms. Miranda Margowsky, a spokesperson for the Financial Technology Association, told CNBC by email that splitting a purchase into four installments with zero to low interest is “smart money management, not financial risk.”

Reed told CNBC she has not missed a BNPL payment because she understands the consequences, but said the payment cycle remains difficult to escape when new expenses arise.

This story draws on original reporting from CNBC.