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June 10, 2022 | Pain For Buy-Now-Pay-Later Loan Investors

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Consumer layaway plans were popular in the debt-fueled boom before the market and economic crash of 1929. Every cycle, finance rolls out old leverage tricks enabling a near-term consumption bump by selling sketchy debts to indiscriminate investors. Same junk another day. Nothing new here; see Funding squeeze at buy-now-pay-later firm flashes warning:

Some of the riskiest loans given to millennials and Gen Z shoppers for clothes and electronics — and neatly repackaged for investors — are dropping in value.

Securitization packages of buy-now-pay-later loans from one provider, Affirm Holdings Inc., are falling in price for investors to buy while becoming more expensive to issue, after rising rates and a cost of living crisis cast a shadow over the sector.

Affirm has over 12.7 million customers and extended around US$3.9 billion of loans in the first three months of 2022. It was valued at US$47 billion in September after a blockbuster listing on Nasdaq in January 2021, but its shares have fallen over 80 per cent this year.

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June 10th, 2022

Posted In: Juggling Dynamite

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