Struggling families are getting caught in a poverty trap by racking up hundreds of dollars of debt using buy now pay later schemes for meat, nappies and other everyday essentials, budget advisers warn.

Financial mentors are increasingly alarmed by the number of people buying groceries through lenders Afterpay and Zip, as low-income whānau struggle to cope with the cost of living.

At a Mad Butcher store in Christchurch, every shopper spoken to by RNZ was buying meat using a buy now pay later service.

Cleaner Mei says she uses Afterpay to buy $120 meat packs for her family of six because she could not afford to pay up front.

"It's my pay-day today and I'm just about broke - that's just food - and I've only got my meat so far. I need to go to Pak'nSave and spend the rest of my money there."

Mei says she's paying $300 a fortnight in Afterpay bills for meat alone.

"I can't get out of it. I'm continuing to Afterpay all my meat from now on. It's just a repetitive cycle that I'm stuck in now. I suppose it's like a gambler, going to the machine and putting in $20."

Another shopper - a mother-of-three on a benefit - says feels she has no choice but to buy food using Afterpay.

"A mother will do anything to feed her kids.

"If you were really strapped you could do a whole week's shop on Afterpay at the Mad Butcher, but two to four weeks later, if you have to do that the next week as well, eventually the payments stack up on each other.

"You're already broke, you've got to rob Peter to pay Paul."

She has just managed to pay off her Afterpay bills, but another big expense is never far away, she says.

"It just depends on good week or bad week. My son just started high school and needed a school uniform. So I had to Afterpay some things for that and try to get a Chromebook. If it wasn't for my mum helping me out, I'd probably be doing more Afterpays to get through."

Under buy now pay later schemes, customers could pay for purchases over several interest-free instalments, side-stepping credit cards and pay-day loans, but users who failed to make repayments were stung with late fees.

The latest figures from credit bureau Centrix show a record 10.5 per cent of buy now pay later accounts were in arrears at the end of March.

According to Consumer NZ, just over 25 per cent of New Zealanders have a buy now pay later account, a figure that has remained consistent through the last 18 months.

The data shows 20 per cent of BNPL users accumulated debt from essentials such as groceries, bills and fuel, while 35 per cent paid for services with a credit card, leaving them vulnerable to a second cycle of debt.

When mother-of-three Larissa could not afford groceries like milk, bread and nappies she turned to buy now pay later lender Zip to stock up on family staples at The Warehouse.

The financial juggling act has left her $700 in debt and despondent about living week-to-week in an effort to feed her children.

"It sucks having to go through all of this every week just to manage," she says.

"You've got to do what you've got to do. I would like to stop using it at some point but that's when I'm in a better financial situation, like my kids aren't in nappies."

Whanganui Budget Advisory Service manager Sandy Fage says families are getting into debt just to survive.

"It's horrendous. I don't know how soul-destroying it must be to be in that position, and then go: 'How do I get some meat for my family?'," she says.

Sandy says low-income earners can't always rely on food banks, so it's only natural for them to ride out a financial storm with buy now pay later lenders.

Good Shepherd head of microfinance Natalie Vincent says 90 per cent of the organisation's loan applicants are buy now pay later users, some of whom have multiple accounts.

"People using buy now pay later to buy essential items like food is telling a troublesome story about the position New Zealand families are in at the moment.

"The debt can become unmanageable quite quickly and spiral out of control, and then it causes all sorts of problems."

Ministry of Business, Innovation and Employment officials are considering draft government regulations for the buy now pay later sector to reduce the risk of people falling into a debt trap.

Under the proposed changes, lenders will have to do robust affordability checks for loans of more than $600, but financial advisers argued the threshold was far too high for people on low-incomes.

Natalie Vincent says any kind of threshold for credit checks is inappropriate.

"At $600 that wouldn't capture our clients or those on limited incomes or with low levels of credit to the buy now pay later service. These are the people who are vulnerable to harm from using a buy now pay later service."

A Zip spokesperson says the company conducts credit checks on all customers and subscribs to an indebtedness indicator that ensures it doesn't lend to people that are behind on payments to other BNPL lenders.

Customers with overdue payments have had their accounts frozen, default fees are capped at $40 and Zip has a hardship policy to help people struggling to make repayments, she says.

A Mad Butcher spokesman says it's up to customers to choose the payment option that best suits them.

Afterpay and The Warehouse did not respond to RNZ's request for comment.

-Jean Edwards/RNZ.