Daniella Genovese
3 min read
Consumers are failing to make payments on their short-term loans.
While Klarna, a significant player in the buy now, pay later (BNPL) space, reported that its user base continued to grow in the first quarter, its losses more than doubled compared with a year earlier, the company said in its Monday earnings report. Its net loss for the first three months of 2025 was $99 million, up from the $47 million loss it reported a year ago.
Its first-quarter consumer credit losses rose 17% compared with the same period a year ago. A spokesperson for the company said the 17% increase was because the company issued significantly more loans in the quarter, causing the dollar value of credit losses to rise. The proportion of loans not paid back increased from 0.51% to 0.54% globally.
Consumers have continually leaned on companies such as Klarna, Affirm and Afterpay to give them more financial flexibility in the face of persisting inflation, high interest rates and student loan payments, which resumed in October 2023 after a pause due to the COVID-19 pandemic.
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Consumers leverage the platforms because they allow for the option to pay in four interest-free installments every two weeks or, if approved, can make monthly payments over the course of six to 18 months, with interest (Afterpay only allows the four-installment plan). But experts have long warned though that these services can easily be a ticket to overspending.
With Klarna, shoppers are able to split their purchase into multiple installments instead of paying the full amount upfront. Klarna fronts all the money upfront to the retailer and then takes money from a consumer-linked payment over an extended period of time.
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If consumers don't have the money to pay, they get hit with a late fee.
Another concern among experts is that getting approved for these services is also extraordinarily easy. For instance, just because someone is approved to use these loans doesn't guarantee that they have the financial means to pay them back, according to LendingTree's chief consumer finance analyst Matt Schulz.
But these issues aren't unique to Klarna. More than 40% of users of BNPL loans say they paid late on one of them in the past year, up from 34% just a year ago, according to a LendingTree survey.
According to LendingTree’s BNPL Tracker, 39% of Americans were at least considering applying for a buy now, pay later loan in April, up eight points from March. This marked the biggest monthly jump since an eight-point increase in March 2023.
