Chances are your “buy now, pay later” holiday bill is coming soon or has already debuted.
If you are not financially ready to pay, late fees or other payments can push you further into debt. Circumstances can change within weeks due to financial setbacks such as unemployment, an unexpected bill, a family emergency, or other events.
When you’re feeling financially stuck with pay-in-four, buy-now-pay-later, and possibly other debt plans, it’s important to create a plan to pay off your balances.
Here are a few options to consider when developing a debt exit strategy.
1. Update your budget
Review your budget and cut unnecessary expenses or replace services with less expensive alternatives. For example, cancel unused subscriptions or switch to a cheaper streaming service.
If you’re also struggling with credit card debt that can take three to five years to pay off, consider consulting with an accredited non-profit counseling agency for a debt management plan that can consolidate some balances into one low-interest payment. . Please note that accounts enrolled in the plan usually need to be closed, which may affect your finances in the short term.
2. Change the due date
Some lenders, such as Klarna and Afterpay, allow you to change your due date or request an extension.
According to the company’s website, Klarna customers using the four-day loan can extend the payment due date for each order once for 14 days. According to company spokesperson Amanda Pyres, Afterpay could provide more leeway by allowing you to change the payment date in the app up to six times a year.
Lender policies may vary, so check the terms of the plan or ask your lender about your options.
3. Communicate with creditors about difficulties
If financial setback or an emergency prevents you from making payments, a lender may offer some “buy now, pay later” relief.
Large companies, buy now, pay later, usually recommend that you contact support as soon as possible about difficulties.
“Confirm that users experiencing financial hardship can contact us through our help center so we can work with them to identify an affordable repayment option that best suits their personal needs,” company spokesperson Casey Becker said in an email. .
Terms depend on the lender.
4. Consider Transferring Your Balance to a Credit Card
If you have a good credit history (FICO score of 690 or higher), some issuers may offer an initial 0% annual interest rate on a credit card with a balance transfer to be used to pay for purchases now, pay off debt later. This can buy you some time if you’re struggling to meet your plan’s payment deadlines, but there are some things to be aware of.
Balance transfer credit cards are designed to help you save on interest payments over a period of time, so they may not make sense for certain “buy now, pay later” plans that don’t charge interest initially. In addition, you can only move the balance up to the credit limit of the card, and there is usually a fee charged on the transfer amount, usually between 3% and 5%. Compare potential purchase now and pay later against these factors.
The process and terms will vary depending on the card issuers that allow it, so ask what to expect. Wells Fargo, for example, may allow you to use a balance transfer to pay “buy now” and then pay off the debt.
“The most common practice is to transfer the balance from another credit card issuer to their Wells Fargo account to save on interest,” Sarah Dubois, a Wells Fargo spokeswoman, said in an email. “If there is a lender that is not technically considered a retail or bank card issuer, customers have other options on how to take advantage of their balance transfer offer (for example, through the balance transfer check that is usually issued with the offer).”
If your credit card issuer offers a balance transfer option in the form of a check, your ability to use it may also depend on the lender’s ability to accept that payment method.
5. Weigh the pros and cons of a personal loan
A personal loan can consolidate multiple debts into a fixed monthly payment at a low interest rate over a specified period. If the funds are sent to your bank account, they can generally be used to pay any lenders, including “buy now, pay later” lenders. A good credit score can qualify for a lower interest rate.
But again, it’s not ideal to pay off debt with a loan, so it’s important to calculate whether the offered interest rate offers a savings over any potential costs for “buy now, pay later” plans. If your “buy now, pay later” plan doesn’t charge interest or fees, repaying it with a personal loan may not be ideal. But it might be worth using the loan to consolidate other debts — if that can free up money to pay off buy-now-pay-later plans.
This article was written by NerdWallet and originally published by The Associated Press.