We’ve all done it. You’re checking out online, and up pops Klarna, Clearpay, or PayPal Pay in 3. Split it into a few smaller payments to sort it out later. Tempting, isn’t it?
Two in five UK adults have used Buy Now Pay Later (BNPL) apps, rising to over half among Gen Z and almost two-thirds of millennials. In just a few years, it’s become an everyday part of how many of us shop, and even a way to get by in a time when budgets are tight.
And every time I see that button at checkout, I completely understand why.
There’s something about Buy Now Pay Later that feels different from other borrowing. It doesn’t come with the guilt of watching a credit card balance creep up, or the formality of applying for a loan. It’s just a button at checkout.
That’s what makes it so seductive. No statement arriving in the post. No balance staring back at you when you log into your banking app. A few small payments that’ll fade into the background alongside your subscriptions and grocery shops. You hope they’ll just blend in and take care of themselves.
The trouble is, I’ve seen where that can lead. People end up playing whack-a-mole with payment dates across four different apps.
The hidden cost of ‘interest-free’
Buy Now Pay Later has exploded in the UK. Over 10 million of us now use these services, with younger shoppers leading the way.
It makes sense. BNPL feels different from borrowing. There’s no application, no monthly statement, no big number reminding you how much you owe. It’s convenient. Invisible.
But that invisibility is exactly the problem.
Research from the FCA found that BNPL users are almost twice as likely to be in serious financial distress compared to the general population. Around a third of users have missed at least one payment – rising to over half among younger borrowers. When you miss a BNPL payment, late fees kick in, and suddenly that ‘interest-free’ purchase isn’t interest-free anymore.
What we see everyday at London Mutual Credit Union is people who’ve ended up with BNPL debt scattered across multiple providers, and they’re not always sure of the total. It’s not that they’ve been irresponsible – it’s that the whole system is designed to feel like it doesn’t really count.
BNPL debt is currently invisible to traditional lenders. Someone could be juggling hundreds of pounds across multiple apps, and when they apply for a mortgage or car finance, it won’t show on their credit report, but the missed payments might.
Why a credit union loan might work out cheaper
I’ll be upfront. BNPL is often interest-free, and we charge interest. That’s a real difference, and one you absolutely should consider.
But for anything bigger than a small one-off purchase, or if you find yourself reaching for BNPL regularly, there’s a lot to be said for borrowing with a regulated lender.
I’ll be honest again: a credit union loan isn’t as instant as splitting a payment at checkout. We check what you can afford. We ask questions. And yes, you’ll pay interest. But you’ll know exactly what you’re paying and when you’ll be finished paying it.
Our rates start at 13.68% APR for loans between £2,500 and £5,000. Compare that to the average UK credit card at around 24.65% APR, or a typical overdraft pushing 40%. For larger amounts you’re planning to pay off over time, we’re often the cheaper option, even with the interest.
Knowing where you stand counts for something. One amount, one payment date, one finish line. It’s not as slick as a button at checkout, but you’re not going to get any nasty surprises with us either.
Is Buy Now Pay Later bad?
As your credit union, our job is to help you understand your options, not tell you what to do. BNPL isn’t inherently bad. It works fine for a one-off purchase you’d have bought anyway and can comfortably pay off. Where it gets tricky is when it becomes a habit, when the payments start to overlap, or when it’s being used to buy things that wouldn’t otherwise be affordable.
Only you can decide what’s right for your situation. However you choose to borrow, it depends on your circumstances, your income, and what you’re comfortable repaying. I’d always encourage you to consider your options, think about what you can realistically afford, and make the choice that fits your situation and priorities. The main thing is making an informed choice.
If you’re weighing things up, our loan calculator can show you what monthly repayments would look like with a credit union loan before you apply.
