Would you take out a loan to purchase your Poha plate?

 Would you buy your Poha plate on a loan?



Just ask yourself: Would you prefer to borrow money to purchase your Poha plate? Maybe you wouldn't. You wouldn't incur debt because of a Poha. However it appears that American households are caught in a debt cycle.

The most recent trend in America is grabbing; due to financial difficulties, people are purchasing daily food products and groceries on credit. This is a startling reality about this industrialized nation. Following the COVID outbreak, many households are experiencing financial issues, and inflation is making it harder for them to stick to their monthly budget. Thus, consumers are utilizing instant credit applications to purchase food by obtaining loans through BUY NOW, PAY LATER schemes, often known as BNPL. Individuals use it to obtain the gadgets they want. People use it to get their desired devices, to buy appliances, or for expensive purchases like a car or machinery.

These kinds of schemes are like you can buy something today on a loan and get what you need on the same day, but you don't have to make the payment immediately. The bill will be split in easy installments and pay the loan over a period of time. However, purchasing food on EMI indicates a financial hardship. It usually indicates that you don't have enough cash on hand to cover basic living expenditures like food.

BNPL loans


Let's examine the Consumer Financial Protection Bureau's (CFPB) data. Currently, 50% of Americans utilize pay-later applications. Among them, one in five shop for groceries using apps. Until their account is credited with the next payment, 27% of Americans make use of these loans.

In the first two months of 2020, during the Covid-19 quarantine, food accounted for 40% of BNPL loans, followed by home furnishings at 38% and other items at 8%.  Due of their extremely user-friendly interfaces and one-step installation and registration method, these apps trapped households in need of financial support throughout and after the pandemic. Pay later loans were just $2 billion as of 2019. In just two years, (2021), that amount rose to $24 billion, or almost 1000%, higher.

BNPL loans



Given that the price of eggs increased by 138% and the price of butter sticks by 38.5%, you can deduce that all supermarket costs in the US have increased. During these two years, the cost of groceries each month doubled. The total amount of credit card debt owed by Americans was $986 billion as of 2022. It's the biggest leap in recorded history.

a debt cycle


It's probable that some Americans are receiving loans to pay for groceries because they are experiencing financial difficulties or have unforeseen costs that prevent them from affording basic essentials like food. This can be especially difficult for people who are unemployed or live paycheck to paycheck because unforeseen costs or a loss of income can quickly deplete their savings.

To pay for their urgent needs, such as groceries, some consumers may resort to payday loans or other high-interest loan products. Regrettably, these loans may include exorbitant fees and interest rates, making it challenging to repay them on time and maybe creating a debt spiral.

People who are having a hard time making ends meet should look for services and assistance that can assist them in resolving their financial difficulties in a long-term manner. This can entail looking for financial guidance or support, investigating food assistance programs or other public assistance options, or figuring out how to get more work or job training to boost their income.

https://www.bloomberg.com/news/articles/2023-04-18/high-grocery-prices-make-americans-use-buy-now-pay-later?sref=EcccZSTc&leadSource=uverify%20wall

https://www.nytimes.com/2022/08/29/dining/buy-now-pay-later-loans-groceries.html

 

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