An anonymous reader quotes a report from The New York Times: Buy now, pay later" loans took off during the pandemic as a way for online shoppers to go on retail splurges without using a credit card. Now, lenders are offering the loans as a means for people to finance basic households needs. The lending apps Flex and Zip allow customers to take out loans to pay for their broadband, electricity, health insurance, mobile phone service, mortgage and water bills. Affirm, one of the most popular pay-later apps, has started providing some tenants loans to extend their monthly rent payment for a few weeks. Many dentists, veterinarians and medical clinics now often offer instant pay-later financing, and Intuit this year started promoting "File Now, Pay Later" loans to TurboTax users who owe money in their tax return. Pay-later loans are becoming the "working capital for the modern middle class," said Karen Webster, the chief executive of Pymnts, a news and market research company for the payments industry. "Consumers are using it more for essential, everyday things." Americans spent $160 billion last year through pay-later loans, according to research released recently by Federal Reserve economists -- nearly twice what consumers spent two years earlier, in 2023. That's still a fraction of the more than $3 trillion U.S. shoppers spend annually on consumer credit cards. But the industry continues to expand by double-digit rates each year. How much of that growth reflects consumer preferences, versus desperation, is a question economists and industry analysts are trying to unravel. The rise in pay-later financing comes as many households are leaning more on debt to keep up with their daily expenses. Paying interest -- to afford basic needs -- adds to the overall cost of living, which has already been rising amid higher medical, housing and fuel costs. For many borrowers, the loans have become their only option: Half of those using them said they could not make ends meet otherwise, according to the latest edition of a survey that LendingTree, a loan marketplace, has compiled for years.

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