An estimated eight million Brits have significant outstanding balances with buy-now, pay-later companies, as consumers continue to be drawn in by unregulated, interest-free borrowing, new research by Credit Karma has revealed.

According to Credit Karma, buy-now, pay-later has continued growing, despite concern amongst industry experts and government, with research indicating providers have acquired another 1.6 million customers (net) in 2021 - now totalling 11.6 million active UK customers.

However, the free credit report provider has urged caution around using such services, which it says could contribute to an opaque debt bubble, as nearly half of customers (45%) admit to falling behind on payments. By the start of October this year, Credit Karma’s research suggested that Brits had spent £5.79bn via buy-now, pay-later, with £4.12bn of this still outstanding to pay.3

Those falling behind are experiencing more than just debt. Nearly a third say they (31%) have seen their credit score drop as a result, while a similar number believe that they have been rejected for a mortgage or other borrowing after missing repayments. Credit Karma has raised concerns around delayed payment services contributing to rising debts, as almost half (48%) of buy-now, pay-later purchases are made on non-essential items, such as electronics, cosmetics or holidays.

Ziad El Baba, general manager at Credit Karma, said: “Buy now, pay later services can be a great tool for people who wish to make a purchase and break up their payments into smaller, more manageable amounts. However, borrowers must be cautious about how much debt they take on via BNPL and make sure they're able to follow through with the terms of the arrangement. This is especially important since missing a payment can have a negative impact on your credit score, which can make borrowing more costly for consumers down the line."

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