‘It Ruined Everything’: Buy Now, Pay Later Drives Gen Z Into Debt

Sarah Pfefferle had already saved $16,000 for her future home by the time she was 18. Then she started using buy-now, pay-later products and “ruined everything.”

In just two months, the Chicago native racked up $5,000 in debt across three of the installment-loan firms. The ballooning balances, alongside unexpected medical costs, drained much of her savings and prompted her to seek help from a financial adviser. But the damage was done: Pfefferle’s credit score dropped to 580 from 720 after she closed her accounts.

Pfefferle, now 21, said her plan to buy a house has been set back at least two years. And she fears she won’t be able to get a mortgage.

“I have little to no money saved for emergencies,” she said. “It’s a vicious cycle.”

Pfefferle is hardly alone. Australian firm Afterpay Ltd. popularized the concept of buy now, pay later as a new spin on layaway plans with an instant-gratification twist. The financial products typically let consumers pay for purchases in four installments with the promise of little to no fees, no interest and quick credit approvals.