Truth About Buy Now Pay Later Programs

Buy now pay later, sounds great, right? Buy now pay later offers can be a sound decision. It offers the consumer the privilege of credit. The best deals are the offers that do not charge interest during the set period of time, usually six to twelve months. Consumer beware! Buy now pay later often times includes a caveat that requires the money to be paid back within the set period of time. If the money is not paid back the consumer will be charged back interest for the full term of the loan.

Usually the interest rate is substantially high. It is not unusual to see rates as high as twenty-three percent or more. It is important to make sure that the money will be paid back within the term. There are two ways to do this: You can make monthly payments that will pay off the full amount, or you can keep the full amount in an interest accruing account.

The ability to buy now, pay later gives the consumer the advantage of keeping money in an interest accruing account such as a money market account or a certificate of deposit (CD). Remember that a certificate of deposit must be maintained according to the terms of the bank or a penalty will be charges. If the CD is a six month term then, the money cannot be drawn upon until after the six month term has expired. One important warning concerning any type of loan is something called a debt to income ratio. A responsible lender will not lend money to a consumer if it would be difficult for that consumer to pay it back. If a consumer has a mortgage payment, a new car payment, and student loans then, his ability to maintain additional loans is limited.

The amount of debt in relation to the amount of income is an important technique that lenders use when considering the qualified consumer. It is easy to get loans if a consumer has good credit and not all lender check debt to income ratio, especially for smaller loans.  This makes these types of programs great for people thinking about computer financing or financing a television set.


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