What are the potential effects of "Phantom Debt?"

[Cory J Thornton]

As a real estate investor I am always curious about lending trends/debt trends in different sectors.  

Lenders and economists alike are speculating about the threats of "phantom debt." This debt type would throw economic projections for economists and increase the risk of lending for lenders.

Phantom Debt is created when a consumer chooses the Buy Now Pay Later (payment plan) option when making online purchases.

These types of payments are not currently reported to any credit agencies as debt which is why they have been given the term "phantom."

Some articles indicate that as many as 42% of those who actively use the BNPL purchase option are either behind in their payment or behind in other payments for other obligations.

Even though this is not something being reported to credit agencies, it could be something that starts popping up on loan applications as the amount of "phantom debt" in the system continues to grow. 

As landlords, this could also be a threat since tenants could have a wall of debt hidden from any financial screening we do during the application process.