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may be the holiday season Financial scarcityThis is why many people rely on borrowed money to cover costs. Shoppers’ demand for longer-term financing options has fueled the rise of a payment option known as “buy now, pay later” – sometimes referred to as BNPL.

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Buy Now, Pay Later Services Lets you split your purchases into multiple interest-free payments over the course of a few weeks or months. Companies such as Affirm, Afterpay and Quadpay offer this payment option at major online retailers such as Amazon and Walmart.

1 in 6 (17%) Americans plan to use a BNPL service to pay for holiday purchases, a . According to new survey By Marcus by Goldman Sachs. This payment option is particularly popular among the younger generation – 28% of Gen Z consumers and 27% of Millennials will use it this holiday season.

But before you choose this financing option at checkout, it’s important to know about the risks associated with the Buy Now, Pay Later apps. Weigh the benefits and drawbacks of using BNPL options to finance holiday purchases, and consider your options, such as credit cards and personal loans. If You Decide to Borrow Money This Holiday Season, Make Sure Compare Interest Rates Trust us to make sure you’re getting a good deal.

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What to know about using Buy Now, Pay Later service

The idea of ​​buying now and paying later is tempting. Instead of paying $200 in lump sum for a valuable holiday gift, a consumer may be able to pay $50 in installments every two weeks until the purchase is paid in full. These services are usually A hard credit inquiry is not required, and some BNPL providers do not charge interest or fees.

That being said, BNPL financing can come at a steep price. Depending on the company you use, missed scheduled payments can also result in a late fee of up to 25% of the past due amount. Some BNPL apps, like Affirm, Charge High interest rates up to 30% APR.

In addition, if you do not pay the balance when you are due, you may be reported as delinquent to the credit bureaus. This can hurt your credit score and make it harder to lock in good terms on financial products in the future.

Before you agree to the BNPL agreement at the time of purchase, read the terms and conditions closely to discover hidden charges.

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Alternative Methods of Paying for Vacation Expenses

Setting aside money throughout the year to cover vacation costs is the best way to cover expenses without worrying about interest, late fee And credit dings.

But the holiday season has a way of sneaking up on you—and suddenly, it’s time to buy Christmas gifts, turkey for Thanksgiving dinner, and even plane tickets to visit family. While many consumers are doing all they can pay off debt from last holiday season, It’s easy to forget about the upcoming.

Finding a way to spread holiday expenses over a long-term payment plan suddenly makes it easier to afford expenses. But if you don’t want to risk using the buy now, pay later service, you have options:

Read more about each payment option in the sections below.

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Use the 0% APR Credit Card Offer

Putting Christmas gifts and other holiday expenses on a credit card can be an easy way to Rack up high interest debt. However, there is one A strategy that can help you finance a purchase without paying interest.

Credit-worthy borrowers may consider opening a new credit card with a: 0% APR Introductory Period, These promotional periods can last up to a year or more, depending on the credit card issuer. Here are some things you should know about zero-interest credit card offers:

  • You’ll need a good credit score to lock down the 0% APR credit card offer
  • Beware of Any Fees, Like Annual Fees and Late Payment Fees
  • Create a loan payment plan to pay off the balance before the end of the term to avoid interest

Visit Credible’s Online Financial Marketplace Browse Credit Card Companies, including those who offer 0% APR Introductory Period,

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Take a Small Personal Loan

If you only need a small amount to cover all your vacation expenses, consider borrowing a holiday loan,

Holiday loans are one-time personal loans that you repay in fixed monthly payments over a specified period of months or years. Lenders determine your eligibility and Estimated interest rate Depending on the length and amount of the loan as well as your creditworthiness.

Interest rates are fixed, so you have a predictable loan payment plan. Also, personal loan interest rates are usually lower than credit card interest rates. The average rate on a two-year personal loan in August 2021 was 9.39%, according to the Federal Reserve, compared to 17.13% for interest assessed for credit card accounts.

Since personal loan rates can vary greatly from lender to lender, it is important to shop around and compare offers before taking out a loan. You can do this Compare Interest Rates For free at Credible with a soft credit check, and a . use personal loan calculator To estimate your monthly payment.

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You have questions related to finance, but don’t know what to ask? Email a trusted money expert [email protected] And your question can be answered by credible in our Money Expert column.