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Buy Now, Pay Later: Should You Opt For This Option?

The buy now- pay later option may seem tempting, but is it right for you? Read to know more.

<div class="paragraphs"><p>Source: Freepik</p></div>
Source: Freepik

The Buy Now Pay Later (BNPL) scheme of payments is the new craze, especially among the younger generation. Many e-commerce and retailers now have various rewards on BNPL schemes and are also offering 'buy now, pay later' EMI options.

But do you know what the BNPL scheme is and how it works? Let’s discuss this in detail.

What is Buy Now, Pay Later?

The BNPL is a payment scheme that allows you to purchase something without paying for it immediately. You can pay the amount at a later date within a specific interest-free period. The BNPL service provider will settle the bill with the merchant at the time of purchase on your behalf. This mode of credit payment is becoming increasingly popular among the cash-strapped younger generation, who may not have access to a credit card. The buy now- pay later apps allow them to borrow credit for small-ticket purchases.

How Does The BNPL Service Work?

Many companies and apps offer the buy now- pay later service, and each of them has its own terms and conditions. However, most of them follow a similar process, which is discussed below.

  1. Purchase a product from a retailer that offers a BNPL option.

  2. Choose the buy now- pay later option at checkout.

  3. The retailer will initiate a KYC process with the BNPL service provider to check your eligibility.

  4. If your request is approved, you can pay the retailer with the BNPL mode (only up to the credit limit provided to you).

  5. On a pre-determined date, you will have to repay the amount to the BNPL service provider.

What Is The Penalty For Missing Repayment?

In case you missed the repayment to the BNPL lender, you may have to face the following consequences:

  • The BNPL lender may levy interest on the outstanding dues if you do not pay the amount within a specific period.

  • They may also charge a late payment fee.

  • Credit rating agencies may note any late repayments, which may affect your credit score. This will hamper your chances of getting any loans from banks or financial institutions in the future.

Advantage Of Buy Now- Pay Later Schemes

Here are some of the pros of the BNPL services:

  • It has increased affordability.

  • It provides access to credit immediately.

  • It provides safe and secure transactions.

  • It offers the option to convert the repayment into no-cost EMIs.

Disadvantage Of Buy Now- Pay Later Schemes

Some of the cons of the BNPL schemes are:

  • It can trigger impulse purchases.

  • You will have to pay a late payment fee in case you miss the repayment.

  • Defaults in repayment can affect your credit health.

Should You Opt For The Buy Now- Pay Later Option?

Now that you know the meaning of BNPL and how this payment facility works, you must decide if opting for this is the right choice for you. You should make note of all the pros and cons of this payment option and then decide if it works for you.

The buy now- pay later facility may help you make purchases without making complete payments, however, you must ensure that you use this facility wisely so that you do not spend beyond your means. And remember that you must repay the BNPL lender on time.

Also Read: Buy Now, Pay Later = Celebrate Now, Worry Later