Buy now pay later, or BNPL is a kind of short-term funding option which permits you to simply pay in instalments by the end of the stipulated time period for making buys. In India, very few online fintech companies and merchants are providing BNPL facilities to you as a suitable payment method. Also, note that this is one of the excellent alternatives to any other loans and credit cards. They are transparent, accessible and offer no-cost EMIs.
What is known as BNPL payment?
BNPL even called buy now pay later is an option through which you can make any purchase without the requirements to pay on your own. Usually, you log in with the preferred buy now pay later app offering this facility, who makes payment on your behalf when you make any buys. However, after the lender pays on your behalf, you must repay the amount in the stipulated time period. As compared to personal loan apps, zero interest is charged under the buy now pay later scheme. You can either pay this as a lump sum amount, or you may pay this through no-cost EMIs (equated monthly instalments). In case you fail to pay this amount within the repayment period, then the buy now, pay later lender may charge you the interest on the amount. Moreover, any delay can affect your credit profile and score severely.
How does the BNPL function?
BNPL lenders share a similar operational model, with conditions being a differentiator. Here are how this generally works –
- Make the purchase at the participating retailer.
- Go for the option ‘buy now, pay later.
- Make a small down payment about the thorough purchase amount.
- Remaining amount may be debited in the series of an interest-free EMI.
Note that the EMI payment can be done through cheques, bank transfers, debit cards, credit cards or directly from a bank account.
What are the benefits of BNPL?
A few of the advantages of BNPL are –
- Transparent and simple procedure
- Zero cost EMI
- Can select a repayment tenure
- Secure and safe transaction
- Instant access to the credit
- Enhances affordability
BNPL – eligibility criteria
Eligibility parameters that you must meet to avail of the BNPL facility include the following –
- You must be an Indian resident.
- You must stay in major cities – tier 1 and tier 2.
- You must be over the age of 18 years. The maximum eligibility age in a few cases may be as high as 55 years.
- You must be salaried.
- You must hold a bank account, and all your KYC documents must be in place.
What is the difference between a personal loan and BNPL or a buy now pay later app?
A few of the major distinctions between a personal loan and a BNPL are listed below –
| Personal loan | BNPL |
| The highest loan proceeds available may be over Rs 25 lakh | The highest loan provided is Rs 1 lakh |
| Unsecured and secured loans are offered | Just secured loans are provided |
| Interest constituent is levied on principal proceeds | Zero interest constituent is charged on principal proceeds |
| Zero restriction on how funds can be spent | Usage is restricted |
| Repayment tenure of as high as 5 years may be offered | Repayment tenure of as high as 90 days |
BNPL and credit card – what is the difference?
There are specific distinctions between buy now pay later and credit cards. Let’s have a look at this –
| Credit cards | BNPL |
| Hidden fees are charged on credit cards | BNPL follows a transparent as well as a low-cost pricing model |
| You should have a strong credit history to get a credit card | It is not mandatory to hold a credit history |
| This comes with a higher flexible acceptance | BNPL facilities and services are offered by select fintech organisations and e-retailers. |
| Credit cards come with an interest-free period | The interest-free period can be as high as 48 months |
| Getting approval may be a little tough | Simpler approvals |
| You get the option of paying just the minimum amount due | You must pay the fixed EMI on the scheduled date |
| You may earn reward points, cash back, air miles on your transactions | Zero such benefits |
Rate of interest comparison (BNPL vs credit card)
| Credit cards | BNPL |
| The rate of interest stays fixed | The rate of interest differs based on different variety of factors |
| Up to 52 per cent p.a. | Up to 24 per cent p.a. |
The rise of BNPL service providers may be owing to the pandemic. With the increasing demand for services of e-commerce owing to lockdowns and customers preferring a breakdown of expenses into smaller EMIs, BNPL is one of the prudent go-to options. BNPL, while may be beneficial as it allows you to borrow and repay without the requirement to pay any interest if repayment is done with the due date, it is a loan you must be careful with while looking to avail this.
While you can avail BNPL approvals simply, failure to make payments within time may hurt your credit profile. Thus, just like other credit options, you require ensuring that timely repayments are performed to maintain a good credit score.
Top BNPL players in the market
A few of the BNPL players in the market are –
- Capital float
- Epay later
- Flexmoney
- Paytm postpaid
- Ola money postpaid
- Amazon pay later
- Simpl
- LazyPay
- ZestMoney
What is the future of BNPL?
The future of BNPL can be extremely bright because the concept attracts more audiences to buy an item of your choice instantly. Most lenders who offer this option at zero cost EMI is most likely to become a highly preferred option, particularly among the youth. However, at its core, this still is a kind of loan, which for customers must be repaid. Lenders providing this service must be careful in providing this facility as not many may be capable of making the amount repayment within the required time period. Customers must understand that failure to make the amount repayment on time may result in a credit score drop as well as you may have to pay a higher interest constituent on the same. The future of buy now pay later appears good provided the customers can better use this facility and clear all the payments on time.
