More than 78 million Americans Utilized Buy Now or Pay Later and Pay Later in the previous year.
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Nearly 78M Americans used Buy Now and Pay Later and Pay Later in the previous year.
NERDWALLET 2022 PERSONAL LOANS REPORT
by Elizabeth Renter Senior Writer/Spokesperson | Personal finance, Data analysis, Economics Elizabeth Renter spends her time searching for consumer insights in datasets and crunching figures for everything personal financial. Her work has been featured in The New York Times, The Washington Post, the «Today» show, CNBC and elsewhere. Prior to joining NerdWallet in 2014, she was an independent journalist. When she’s not playing with words and numbers, Elizabeth enjoys traveling, lifting weights and restoring the beauty of her Victorian home. She is based in Clay Center, Kansas.
October 11 10th, 2022
Written by Kim Lowe Lead Assigning Editor The consumer lending Kim Lowe leads the personal loans editorial team. She joined NerdWallet after 15 years managing content for MSN.com that covered food, health and travel. Her first job was as a journalist for publications which covered mortgage, supermarket and restaurant industries. Kim received her bachelor’s degree in journalism at The University of Iowa and a Master of Business Administration from the University of Washington.
A majority of the items featured on this page are provided by our partners, who pay us. This influences which products we write about and where and how the product is featured on the page. But, it doesn’t affect our assessments. Our views are our own. Here’s a list of and .
When your car fails to start and your bill for utilities is soaring it is easy to find the funds to pay for these costs. If the money doesn’t be available, you might have to resort to alternative, and sometimes more costly options.
Although 50% of Americans are likely to use credit cards in order to settle bills and pay for other household expenses during tough economic times if they didn’t have cash available Some would resort to alternative sources that are more modern and innovative as per a NerdWallet study of 265 U.S. adults conducted Aug. 4-8 on the web by Harris Poll.
According to the study, 14% would most likely use «buy now, and pay later» services, and 11% would use mobile cash advance apps to pay off bills and other household expenses during difficult economic times.
«Buy now and pay later» isn’t only for clothes and shoes. Many people use these services for things like gas, groceries and health care costs,» says Annie Millerbernd the head of NerdWallet’s personal loans. «They seem like an easy method to pay for essentials when you’re short on cash. However, problems arise when you aren’t able to make the payment in time.»
Within the past year millions of Americans have made the switch to these new financial tools, and the youngest adults tend to lead the charge, according to the survey.
Editor’s note: All through the report, when discussing what funding sources Americans will most likely utilize during tough economic times, we are talking about the sources they’d most likely utilize to pay for bills and cover other household expenses if they did not have enough cash on hand to cover them.
The key conclusions
Credit cards are a staple however, buying now and pay later is also a source during trying economic times. Half of Americans (50%) are likely to make use of credit cards to pay payments and other household expenses in times of economic hardship in the event that they did not have cash in their wallets. Certain people would choose to use newer funding types: 14% would be more likely to utilize buy now, pay later and 11% would use cash advance apps on mobile devices to pay bills and expenses during such times, according to the study.
Millions of people have used buy now and pay later services in the last year. Around 78 million Americans (30 percent) have used the buy now, pay later services within the past twelve months, the study found. Among them, they’ve used it six times, on average.
Apps for mobile cash advances can provide millions of Americans quick cash. About 49.2 million Americans (19 percent) have utilized mobile cash advance apps in the last 12 months. Like BNPL and BNPL, these apps are most popular among younger generations: 38 percent in Gen Z (ages 18-25) and 39 percent of young people (ages 26-41) have utilized them in the past year, versus 11% from Gen X (ages 42 to 57) and the baby boomers, who comprise 2% (ages between 58-76) According to the survey.
More Americans utilize BNPL over personal loans. Over the last twelve months 24 percent of Americans, or 62 million, have taken out at the very least one personal loan and borrowed $5,046, or more during the timeframe according to the study.
Where do Americans turn in the midst of tough times
The majority of Americans (50 percent) would be most likely to make use of credit cards for paying bills and other household expenses if they did not have enough cash on hand to pay for them in times of economic hardship, such as a recession, unemployment or other unexpected expenses. The credit card was the second most often mentioned financial source according to the survey.
Fewer, 43 percent of Americans are likely to use their savings for emergencies to pay such expenses during those times, the survey found. Setting aside a fund like this requires time and space in your budget to make it occur. Understandably, not everyone has these savings.
For a chart illustrating how all generations responded to the poll, .
«There are many ways to borrow when funds are limited, but credit cards and personal loans can have tough borrowing conditions,» Millerbernd says. «Buy now Pay later, buy now, or cash advances are much easier to qualify for but could lead people to overextend themselves.»
Pay later, buy now is becoming a hugely popular choice
The survey found that 77.7 million Americans have used the Internet in the last 12 months according to the survey. This accounts for 30 percent of Americans less than 37% in the survey we conducted in September 2021.
They’ve also used it often around six times in the last 12 months, which is about average.
Pay later, buy now This is an installment loan made at the point of purchase, whether that’s at the cash register or on the internet. This type of service can allow you to spend more than you normally might because you’re paying just part of the cost at the point of purchase. They also come with the risk of possibly significant charges, particularly in the event of a late payment. Because the loans generally do not require a test of credit score, they might be attractive to those with poor credit scores or would not be eligible for other kinds of credit.
Half of the millennials (50 percent) and 44 percent of Gen Z have used BNPL over the last 12 months, according to the survey. This is in contrast to 25% of Gen X and 14% of baby boomers.
49.2M use mobile cash advance apps in the last year
A total of 49.2 million Americans (19%) have used a smartphone in the last twelve months, according to the study.
Mobile cash advance apps often referred to as paycheck advance apps, essentially loan you money from your upcoming pay check. These loans are limited, usually between several hundred dollars and many of them have subscription or other fees built in. While they could provide quick cash in the event of an emergency and you aren’t able to tap other sources of cash, they can be expensive when you consider the amount you can borrow.
Similar to BNPL Mobile cash advances are more frequent among younger generations. For instance, 38% of Gen Z, 39% of young people, 11 percent of Gen X, and the baby boomers, 2% have used these apps in the past year.
Additionally they are more likely to be utilized by people who earn less -26% of people who earn less than $50,000 and 22% with a household income of $50,000-$74,999 have utilized these apps in the past twelve months, as opposed to 15% of people with households earning $100k or higher.
Personal loans are a source of financing to one-quarter of Americans
Individual loans are a long-standing source of funds to pay off debts or to purchase new products. The repayments are set and the interest rates are low for well-qualified borrowers. But the share of Americans taking out personal loans is currently lower than those using BNPL services. Furthermore, the two financing sources can at times be used for the same goals.
Within the past twelve months, 60 million Americans (24%) have taken out at the very least one personal loan, down slightly from 29% in the previous year .
In the average, these borrowers were able to take out $5,046. A full 28% of borrowers took out $5,046 or more over the one-year period.
Time horizon: One way to select your money source
If you’re looking to or require to purchase something, you can do so outright with available cash, a debit card or credit card. You can pay in full before each due date. However, unexpected expenses and challenging financial situations can occur often, and the largest purchases can’t be fit in a budget.
Although all of these sources require you to pay them back over time, thinking about how long it will take to pay for the expenses will help you in picking the right option.
Short-term funding
If you require money fast but only for a limited period, think about the following alternatives. The costs associated with these — which include interest and/or fees — could be very high, so you’ll need to plan for an immediate payoff and make use of them for necessities rather than needs.
Mobile cash advance applications: Use in case of an emergency and in case you don’t have an emergency reserve. These apps could be useful to bridge an income gap or pay for a utility bill that’s due a few days before your next paycheck, for example. But be careful: They could make it easier to borrow more money.
Credit cards: Credit cards are an great for covering costs, as long as you can pay off the entire amount by the monthly due date. If you don’t and the interest costs will stack up quickly.
Long-term financing
Consolidation of debt and unexpected expenses — like an appliance in your home that stops working or car repairs — might not take years to pay off however, it will certainly take longer than a couple of weeks.
Credit cards with 0% APR If you’re eligible for credit cards that offer up to a year of interest-free credit. They can be particularly useful for the transfer of high-interest credit card debt or for unexpected large expenses. Be sure to pay off the amount in full before the interest-free period is over, or you’ll be charged interest accrued during that time also.
Pay later, buy now: Terms vary by BNPL company, however certain companies may offer terms that last up to a couple of months or even years. The downside is that most don’t report on-time payments to credit reporting agencies, which means they won’t help improve your credit score.
Longer-term funding sources
Sources that allow you to pay off a loan or line of credit over a longer time frame may have credit qualifications which short-term alternatives don’t. One advantage is that the loan doesn’t «cost» you as much , since interest and fees are generally lower.
Personal loan Personal loans might have a very high bar for qualification, but they could be an important source of funds repaid over a long term. If you can get them through traditional credit unions or banks they may allow you to get the lowest rate when you’re an existing account owner.
401(k) loan: These loans , because you’re borrowing against your nest egg and in the event you lose your job and can’t pay it back, your loan may be rescinded and taxed as an income withdrawal. However, the interest rates could be advantageous and loan amounts are generous, and they do not require a credit check.
Line of Credit for home equity, also known as cash-out refinance: Homeowners are able to make use of additional sources of funding by tapping the equity in their home. This kind of loan can be low-interest, but similar to a mortgage, it can put your home in danger should you default.
«Emerging financing options such as BNPL and cash advance applications are throwing a wrench into the traditional range of financing options,» Millerbernd says. «The crucial factor to successfully borrowing money is knowing what you’ll pay back in advance.»
The METHODOLOGY
This online survey is conducted across the U.S. by The Harris Poll on behalf of NerdWallet from Aug. 4-8, 2022 with 2,065 U.S. adults ages 18 or older. The precision of sampling of Harris online polls is assessed by using a Bayesian credibility interval. In this case, the data from the sample is precise to within +/- 2.8 percentage points, using 95% confidence levels. For complete survey methodology, including weighting variables and subgroup sample sizes, contact Alikay Wood at
Calculations that determine the number of Americans have taken advantage of personal loans; buy now, pay later; as well as mobile cash advances apps Based on estimates of the population for 2021 of census data from the U.S. census.
The question on funding sources used in tough economic times was stated as «Which of the following sources are the most probable sources you will utilize to pay bills and cover other household expenses in tough economic times (e.g. recession or job loss, sudden costs) when you were not able to have money available to cover the expenses? Please choose all of the ones that you can.»
Disclaimer
NerdWallet is not liable for, expressly or implicitly, any warranties of any kind, including those of merchantability and fitness for a particular purpose or whether the article’s information is accurate, reliable or free of mistakes. The use or reliance you place on this information is entirely at your own risk, and its accuracy and completeness cannot be guaranteed. The information in this article should not be relied upon or associated with the performance in the future that of NerdWallet nor any of its subsidiaries or affiliates. Any statements that do not reflect historically accurate are forward-looking statements that involve risks and uncertainties, as stated by terms like «believes,» «expects,» «estimates,» «may,» «will,» «should» or «anticipates» or similar expressions. These forward-looking statements could materially differ from NerdWallet’s presentation of data to analysts as well as its actual financial and operational results.
About Elizabeth Renter’s role as an experienced senior writer and data analyst at NerdWallet has been mentioned in The New York Times, The Washington Post, CNBC and other sources.
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