Medical debt significantly increases the likelihood a person will turn to payday loans or Buy Now, Pay Later (BNPL) services to cover immediate expenses. A study of 2,021 nationally representative U.S.
adults published in Health Affairs Scholar in July 2026 found that having any medical debt at baseline was associated with an 11.9 percentage-point increase in the probability of subsequently using these high-cost alternative financial services within one year. These findings are especially relevant because BNPL has become a standard payment option at medical providers and billing departments. The shift reflects a broader financial squeeze: medical debt depletes household resources and damages credit scores, leaving people with fewer conventional borrowing options and pushing them toward more expensive alternatives.
Official resources:
- Read the original research from NIH — Use this page to review the original research.
- Read the original report from NIH — Use this primary source to review the complete report.
Table of Contents
- How Medical Debt Drives People to Payday Loans and BNPL
- Who Is Most Vulnerable to This Cycle
- The Hidden Cost: How BNPL Fees Multiply Debt
- Payday Loans: The Steepest Cost
- What the Study Does and Does Not Show
- Practical Steps If You Face Medical Debt
- Frequently Asked Questions
How Medical Debt Drives People to Payday Loans and BNPL
The relationship works through depleted savings and damaged credit. When medical bills hit, a household's accessible cash shrinks, and existing debt counts against creditworthiness, making conventional loans and credit cards harder to access. Payday lenders and BNPL providers operate without the same credit checks, making them the next available door—even though both carry steep costs.
In the study sample, 22.3% of adults reported any medical debt, and 23.9% reported using alternative financial services in the same period. The association held across increasing debt amounts, from $500–$999 to more than $5,000 at baseline, suggesting the mechanism is not limited to small medical bills.
Who Is Most Vulnerable to This Cycle
The study shows that vulnerability to alternative financial services is not evenly distributed. People earning under $50,000 annually, women (19% compared with 14% of men), and those without a bachelor's degree face higher odds of turning to payday loans or BNPL. Gen Z is particularly exposed: 57% report falling behind on at least one payment in the past year, and Black and Hispanic adults face compounded financial strain. For these groups, a single medical debt event can quickly cascade into multiple debts when payment deadlines are missed.
The Hidden Cost: How BNPL Fees Multiply Debt
Buy Now, Pay Later is marketed as interest-free, but the fine print conceals how quickly a deferred payment becomes an expensive emergency. BNPL usage reached $70 billion in 2025, and 42% of users explicitly reported using BNPL to pay for medical or dental care. A concrete example: a $2,000 medical bill split into four interest-free payments sounds manageable until a payment is missed.
A late fee of 15% to 36% then adds $300 to $720 in charges—costs that many people cannot absorb without taking out another loan. Current data shows 47% of BNPL users are now late on at least one payment, up from 41% the year before.
Payday Loans: The Steepest Cost
Payday lenders offer a different trap. With average APRs reaching 400%, a $500 payday loan to cover a medical debt gap can cost $150 to $200 in fees alone—and often leads to rollover debt when the next paycheck is too short to repay both the original and the new obligation. The study confirms that medical debt increases the likelihood of using payday loans specifically, not just BNPL. This is significant because payday debt spirals are well documented: most payday borrowers renew or roll over their loans within two weeks, turning a one-time emergency loan into a months-long trap.
What the Study Does and Does Not Show
This study is prospective—it measured which people used alternative financial services within one year of reported medical debt—but it does not prove that medical debt caused the alternative loan use. Correlation and causation are not the same, and the study captured only a one-year window. Longer-term effects and the full spiral of debt are beyond this study's scope. However, a separate cohort study found that any medical debt was also associated with a 7-percentage-point increase in housing instability in the subsequent year, suggesting that medical debt cascades into multiple hardships beyond just borrowing choices.
Practical Steps If You Face Medical Debt
If you have medical debt and are considering payday loans or BNPL:
- Contact your hospital's billing department or patient advocate to ask about financial hardship programs, payment plans, or charity care—many hospitals will waive or reduce bills for uninsured or low-income patients.
- Request an itemized bill and review it for errors, which are common and sometimes resolve a significant portion of the debt without negotiation.
- If you are already using BNPL or payday loans for medical bills, make the minimum required payments first, then focus on paying down the highest-interest debt (payday loans) before the interest-free grace period on BNPL expires.
- Check whether your state has a medical debt protection law or debt relief program; several now offer forgiveness or limits on medical debt collection.
Frequently Asked Questions
What is the difference between a payday loan and BNPL?
Payday loans are short-term, high-interest loans (averaging 400% APR) due in full on your next payday. BNPL splits a purchase into interest-free installments but charges steep late fees (15–36%) if you miss a payment. Both are used to bridge immediate cash gaps when medical bills hit.
Does medical debt directly cause BNPL and payday use, or is it just correlation?
The study found an association—medical debt increased the likelihood of alternative loan use—but did not prove causation. Other factors, like prior financial stress or income loss, could contribute to both medical debt and borrowing choices. The study's one-year window also misses longer-term spirals.
What should I do if I've already missed a BNPL payment on a medical bill?
Contact the BNPL lender immediately to understand the fee amount and your options. Some lenders allow a one-time payment deferral or offer a hardship program. If the debt has been reported to a credit agency, prioritize paying it down to limit further damage to your creditworthiness.