People With Multiple Buy Now Pay Later Accounts Are at Risk of Falling Into a Debt Trap

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Australians who rely on Buy Now Pay Later companies to finance their purchases are at risk of falling into a debt trap due to the lack of regulation that allows borrowers with multiple accounts to go unnoticed.

According to recent research, this could lead them down an unsustainable financial path. A new study by the University of Sydney has revealed that debt trap risks are genuine for those who utilize multiple Buy Now Pay Later (BNPL) accounts.

The research, which looked at transaction data from 819,415 BNPL customers, found that a staggering 40 per cent of users had more than one account with providers like Afterpay, Zip and Klarna.

The study found that having multiple BNPL accounts increases the chances of running up large amounts of debt over time due to no regulation requiring disclosure or limits on total borrowing limits across different versions.

Senior finance lecturer and study co-author Andrew Grant said, “There’s such a limited amount of transparency in the marketplace,”

“There’s real concern that lenders don’t know how much BNPL debt people have,” he added.

Having multiple BNPL accounts can also lead to problems when it comes to repayments being missed, as they can be easily overlooked if spread across several providers. This then incurs late fees and default fees, which further add to an individual’s debt load and increase their risk of entering a downward financial spiral.

The research also revealed that specific demographics were more likely than others to have multiple BNPL accounts, including younger people, males and those living in lower socio-economic areas and outer metropolitan suburbs. It highlights the need for better customer education and prevention strategies, so people understand the potential pitfalls before taking out numerous BNPL accounts.

Overall, the research serves as an essential reminder of the dangers posed by using multiple BNPL services without taking proper precautions to ensure you can meet your payments on time and avoid getting into long-term financial difficulty.

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