5 things to know about Buy Now Pay Later

Jimmy Hilloo | July 11, 2022

What is BNPL?

Buy Now Pay Later, a.k.a. BNPL, is a financing option that allows you to avail a service or purchase a product without worrying about paying for it immediately. Simply put, it’s a short-term loan product where the lender pays the service provider or the merchant when the sale takes place, allowing the buyer to repay the loan later with either no or very less interest charges. So, what are the 5 things to know about Buy Now Pay Later schemes?

What can be bought with BNPL?

You can use BNPL to make both online and offline payments. Recently, e-commerce firms like Amazon and even banks such as ICICI and HDFC have begun offering this facility to shoppers. Furthermore, even app-based fintech platforms like CASHe, MoneyTap, LazyPay, and PhonePe extend BNPL loans. So, you can use BNPL to buy groceries, apparel, gadgets, travel bookings and even food deliveries. 

If you’re purchasing these items online, you can instantly use BNPL and make payments. Likewise, in the case of point-of-sale transactions, you can use BNPL to make payments by simply scanning the QR code. In short, you do not need any OTP or pin but the merchant needs to have the BNPL payment option to ensure a successful transaction.

 It’s one of the most appealing things to know about buy now, pay later.

What is the catch?

Since it is such an easy access to credit, it could lead borrowers to a debt trap. Although the loans are small but multiple loans from different lenders could impact the borrower’s repayment ability, thus affecting the credit culture. Since BNPL focuses on first-time borrowers with no credit history, they could default, and lenders risk higher NPAs. Also, the interest-free window for repayment is a significant hook, besides the relaxed loan eligibility. If you don’t repay the amount within the stipulated window, you’ll be charged interest on the unpaid amount along with the hefty late payment fees. The final blow could be the payment delays reported to the credit bureau, thus adversely impacting borrowers’ credit scores. 

Is it better than using a credit card?

While both BNPL and credit cards are similar since they offer deferred repayment options, there are some key things to know about Buy Now Pay Later schemes. Firstly, BNPL has easier and hassle-free access to credit since credit cards require good credit histories. Secondly, using BNPL is comparatively easy, all you need to do while purchasing is choose the option during payment. 

Lastly, there’s a difference in their interest-free credit periods too. While credit cards have up to a 45-day credit period, BNPL has shorter credit periods of just 15-30 days. But credit cards come with many charges like recurring annual fees, joining fees, etc., while BNPL has no such charges. So, if you’re looking for shorter interest-free credit loans and don’t have a credit history, then BNPL is the right option for you.

How to make the best use of BNPL?

While deferring payment without interest sounds exceptionally appealing, you might make purchases you can’t afford and spend more than you should. So, if you’re already overleveraged, it’s best to avoid BNPL. Plus, younger borrowers need to remember that it’s creating their credit histories. So, BNPL is best for those who use this credit limit responsibly and keep repaying on time, thus enhancing their future spending limits.

All-in-all, if BNPL is good for you, this is where ePayLater steps in. We help responsible borrowers requiring constant access to funds use it wisely without any unnecessary expenses. 

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