Buy Now Pay Later is a short-term loan that allows consumers to pay for their items in small installments over time. However, due to the popularity of Buy Now Pay Later, there has been an increase in what many have started to label “phantom debt”.
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Welcome to Money Tip Tuesday from the Making Money Personal podcast.
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Now back to today’s tip.
The term phantom debt can mean multiple things. Traditionally, phantom debt is a debt that is too old to collect legally, so it’s either written off or sold to a collection agency. Phantom debt may also refer to when scammers try to collect money that is not owed to them by threatening legal action. However more recently, phantom debt has come to mean a debt that can’t be measured since it’s not reported.
According to many reports, Buy Now Pay Later is a large producer of these unmeasured phantom debts. Because of its convenience, consumers are finding it easier to use Buy Now Pay Later services to pay for larger items in smaller installments than paying for it all upfront. However, that means people are using Buy Now Pay Later to buy more big-ticket items than they can actually afford. This results in loan stacking, which is borrowing multiple loans at the same time. With more and more of these Buy Now Pay Later loans, it can be difficult for consumers to keep track of them. If you don’t pay these loans on time, you will get hit with late fees and your credit score will lower.
If you’re struggling with Buy Now Pay Later debt, aka “Phantom Debt”, there are a couple things that you can do. The first thing you can do is request a payment extension. Some Buy Now Pay Later lenders will let you either change or extend the payment due date which can provide some much-needed extra time pay off the debt. You could also apply for a debt consolidation personal loan, which would combine some or all of your debts into one single loan. This not only makes it easier to keep track of existing debt but it can even help improve your credit score as you make those regular, consistent payments to pay it all off on time.
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