Buy Now Pay Later
Buy Now Pay Later (BNPL) is a limited-time micro-loan that allows cash-strapped or budget-conscious purchasers to make small-ticket purchases and repay the borrowed money later.
BNPL is an unsecured loan that must be repaid during the payback cycle, which typically ranges from 14 to 90 days and is typically paid in interest-free EMIs based on the loan terms.
BNPL credit providers employ technology to learn about their customers’ purchasing habits and repayment history. This allows them to quickly analyse the borrower’s creditworthiness and disburse the loan online. BNPL credit providers adjust the credit limit based on the customer’s repayment capacity, purchasing habits, and other factors.
Benefits of BNPL
Among the advantages of BNPL are
- Credit is available immediately.
- Repayment terms that are flexible
- Increases affordability while having no effect on the monthly budget
- The digital method that is safe and secure
- Options for no-cost EMI
BNPL v/s Personal loan
Personal loans are large-ticket, all-purpose, unsecured financing options with substantially bigger credit limits than BNPL services. However, unlike BNPL, greater fees apply. Another important distinction is the availability of rolling credit, which BNPLs provide and personal loans, which are one-time loans, do not. Furthermore, lenders examine a customer’s age, income, credit score, occupation, and other factors to determine loan eligibility, even though the application procedure and loan disbursement are swift for pre-approved loans. BNPLs, on the other hand, often use new-age processes to establish the borrower’s creditworthiness, usually requiring just a few minutes.
BNPL v/s Credit cards
Credit cards outperform BNPL in terms of widespread acceptability because the latter is currently limited to partnering merchants exclusively, even if the service providers are constantly adding hundreds of new partners. Credit cards can offer rewards and privileges, allowing users to save more and live a more luxurious lifestyle through their transactions. Cards with larger spending limitations may be more difficult to obtain due to more stringent underwriting requirements. Unlike credit cards, BNPLs do not charge yearly, processing, or renewal fees. The key differential, however, is the lack of interest charges on BNPL services – unlike credit cards, customers must pay a non-cumulative fee for late payments, though certain cards now offer zero-interest EMIs.
BNPL v/s Personal loan v/s Credit card
The decision should be based on your needs, eligibility, and payback abilities. It is important to note that if you are unable to make payments on any of these three credit choices, you will be subject to a significant penalty.
In conclusion, BPNL and credit cards are appropriate for small-ticket expenses. If you must choose between BNPL and a credit card, the credit card is a superior option (if used carefully) due to the flexibility and perks it provides. However, BNPL makes sense if you need to purchase a small-ticket item and can quickly repay the borrowed money with your following month’s salary or within a few days without affecting your budget.