Using BNPL services? Here’s how you can use it wisely

Buy Now Pay Later (BNPL) services saw an upsurge during the pandemic. It grew by 21% in the past six months and reports indicate that this service will grow at a CAGR of 15% and above for the next five years. However, while BNPL seems to make payment easy for several consumers, in reality, it also has its downsides. To understand this better and know how to use BNPL services let’s dig a little deeper.

Advantages of BNPL

• You get instant access to funds without going through a long process. BNPL companies employ Artificial Intelligence to deeply analyse the financial standing, liquidity, and credit history of the borrower. Hence the approval is instant compared to credit cards and personal loans.
• The funding you get is interest-free. You repay only what you borrow.
• Though credit score is one of the criteria for lending, it is not the important one. You can use the BNPL option even when your credit score is low.
• You can also foreclose the loan without paying any penalty.
• You can purchase your desired products instantly before the cost increases.
• The BNPL process is simple, transparent, and efficient.
• BNPL as a payment option is getting wide popularity. Hence you have a lot of options in choosing a trustworthy BNPL service provider.

Disadvantages Of BNPL

• You have to pay interest at the rate of 10% to 30% if you miss your EMI or do not repay within the agreed period. Additionally, there may be penalties and other charges for late or missed payments.
• Any missed payments badly impact your credit score.
• It can lead to uncontrolled and impulsive spending habits. You tend to buy what you don’t need. You get trapped in a vicious cycle of debt.
• The credit limit provided by BNPL players is very low compared to a credit card or personal loan.
• BNPL is a sword with 2 edges. Cash flow uncertainty tempts you to opt for BNPL and the same uncertainty can lead you to a financial burden.

Tips And Tricks To Use BNPL Wisely

• The major drawback of Buy Now Pay Later is it can become an easy way out and lead to uncontrolled spending habits. Decide the importance of things you want to purchase through BNPL. The utility of a commodity must be more than the cost you incur. Hence keep a vigilant check on your spending habits. This can help in utilising the real benefits of BNPL.
• BNPL is interest-free between 15 and 45 days. Use BNPL only if you expect any inflow of income. You can fix your purchase and repayment tenure according to the timing of your income. Thus you can avoid defaulting.
• It is best to use BNPL for big-ticket purchases. If you happen to use it for your regular spending like groceries, it is best to avoid it. You will be paying double or triple what you spent as the penalties are hefty for default with BNPL.
• If you are already having loans, it is best to think twice before opting for BNPL as you may fall into the debt trap.
• Go for leading BNPL service providers who are transparent about the terms and conditions. Avoid falling for spammers and fraudsters.
• Most credit card providers give no-cost EMI for big-ticket purchases. Compare the repayment tenure, charges, and interest on credit card on your credit card and BNPL. Use the cost-effective option.

Who Are All the BNPL Service Providers?

The following are the popular players in the BNPL industry.

• Amazon Pay Later
• Flipkart Pay Later
• Paytm Postpaid
• Ola Money Postpaid
• MobiKwik
• LazyPay
• Paypal
• ZestMoney
• Capital Float
• EPayLater
• Simply
• Afterpay
• Affirm
• Klarna

Eligibility For Buy Now Pay Later

• You must be an Indian Resident
• Age between 21 years and 55 years
• You are having a fixed monthly income and bank account. The credit limit is fixed based on the average monthly account balance.
• PAN and Aadhar linked to the bank account

How much can you borrow through BNPL?

You can borrow as low as Rs 2,000 and up to Rs 1 lakh.

Repayment Tenure

You can repay within 3, 6, 9, and 12 months of purchase.

How To Use The Buy Now, Pay Later Option For Purchases?

Online

• Browse through the products and check whether your product qualifies for BNPL.
• Go through the terms and conditions of the BNPL service provider.
• Understand the repayment tenure, EMI, interest cost, and other charges.
• Provide the KYC documents and income proofs.
• Check out using Buy Now Pay Later.

Offline

• Check whether the merchant outlet is a participating merchant for BNPL.
• Inform the seller that you want to use BNPL.
• The seller will require you to make a small down payment and the balance can be paid through BNPL.
• Once the option is exercised, EMIs will be deducted from your bank account for the agreed tenure.

The Takeaway

BNPL gained popularity during the pandemic period as buyers preferred instant purchases with easy EMI options. The instant approval and funding make it more attractive. Buy Now Pay Later is the most helpful option for cash crunch and credit-deprived consumer groups.

However, the option should be exercised diligently for satisfying genuine needs. BNPL can be a friendly payment service when used minimally and repaired regularly. Though BNPL providers do not make any hard credit checks on your profile, any default in repayment is immediately reported. Hence the intention to repay it on time must be greater than the intention to borrow. Use BNPL wisely to reap the real benefits.

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