Buy Now, Pay Later Started for Shopping. Now It Pays the Rent.
A rent focused app now processes about $2 billion a month in rent loans and is expanding into utilities and car loans.
The Daily · ‘Buy Now, Pay Later’: A New Wave of Consumer DebtBuy now, pay later lenders that started as a quick way to split an online purchase are now offering credit for rent, groceries, utilities, and car repairs.
Stacey Cowley, a New York Times reporter who covers these loans, says the shift matters because the product has morphed from an online checkout button into a broad form of everyday credit for people struggling to make ends meet.
The loans are moving into the physical world through payment cards that shoppers can tap and pay with at a register. Shoppers describe using Klarna, a pay later app, to buy groceries at Aldi, and using Klarna and Affirm, another pay later app, to pay a car note or cover a car repair.
Vendors are leaning into the demand for essentials. Flex, an app long used to pay rent, processes about $2 billion a month in rent loans and this year began expanding into utilities and auto loans. Affirm began financing rent this year, saying it was responding to user demand.
One analyst Cowley spoke with called the loans "the new working capital for the working class." The next thing to watch is how many other lenders follow Flex and Affirm into recurring monthly bills.
Questions people ask
Why would someone borrow for rent instead of just paying late?
Rent is usually due in one large lump sum on the first of the month, while pay arrives in smaller paychecks. A short term loan can split that lump sum across paydays. The tradeoff is fees and automatic withdrawals, which can leave less cash for the next bill.
How does paying with these loans in a store work?
Many lenders now issue a one time card number or a stored card in a phone wallet. At checkout, the shopper taps or enters it like any other card. The lender pays the merchant, and the shopper repays the lender in installments over the next few weeks.
Is using these loans for groceries a sign of financial stress?
It can be, because groceries and rent are recurring needs rather than one time wants. Consumer finance researchers watch this shift closely for that reason. It does not prove distress in every case, since some users prefer installments for budgeting or convenience.