Taking credit helps an individual to increase his/her purchasing power immediately and enables him/her to afford unaffordable things.
It is a good thing to have and can help the individual to grow his/her wealth significantly if he/she invests the credit amount.
But, with the growing popularity of the BNPL apps which offers Buy Now, Pay Later schemes to purchase things, this is becoming a worrying factor for a lot of individuals.
BNPL apps are generally targeted towards the millennials and Gen-Z who are young and consume goods and services.
The problem, however, is that the BNPL apps may provide an easy term of repayment but, this type of scheme may lead to purchasing non-essential goods and spiraling debt.
This is known as the new form of debt which you can subscribe to. In this article, we will discuss what is Buy Now, Pay Later Loans, whether Is it a boon or bane, and how to use it effectively.
What is Buy Now, Pay Later Scheme?
Buy Now, Pay Later or abbreviated as BNPL is a type of payment method in which the buyer will receive the product without having had to make any payment while buying it, and the payment for the product is done later usually in flexible EMI plans.
The individual also needs to have a Credit Score to subscribe to this scheme as it is essentially a form of loan only. You can also use this type of payment method to improve your credit score.
Why Choose BNPL Method of Payment?
A flexible mode of payment helps individuals in affording the unaffordable. Taking credit is a good thing and enables you to have increased purchasing power.
When it comes to personal financing maintaining cash flow is important and that requires cash flow management.
You can manage your cash flow by making strategic purchases and planning the EMI payments. If you are a working professional with a stable job then you can have a debt repayment capacity of 30% of your salary.
So, planning your purchases as per this structure will help you in managing your repayments. If you use the BNPL method of payment wisely then it is a great option for purchasing an item.
Pros and Cons of BNPL
The following is the list of pros and cons that the BNPL method of payment comes with-
| Pros | Cons |
| BNPL payment allows you to pay the purchase amount over a set period usually 50 days. | The credit limit provided by the BNPL companies is usually very low which is determined by the Average Monthy Balance of your savings account |
| Just like EMI, your payments will also de auto-debited from your account | If your auto-debit fails, then you’ll be charged interest and bank fees for an inadequate balance in your account. |
| Extra offers and savings can be done if you use the BNPL payment method | There are no value-added features like reward programs, access to the airport lounge, etc. |
| The BNPL scheme is a very limited scheme that you can only use on a few platforms like brand online websites, etc. |
Final Verdict: Should You use BNPL or not?
Finally, whether to use Buy Now, Pay Later, or not. Well, BNPL is a good method of purchasing any goods or services however, you’ll have to use it wisely.
Just like a credit card, this can be dangerous as well and may put you in financial strain. The non-payment of the amount may lead to your credit score being affected.
If you do not have a credit card, then BNPL may be a good option for you to use as it will increase your credit score slowly and will make you eligible for a credit card.
BNPL can also be a good option if you want to manage your cash flow and do not want to feel a cash crunch after purchasing the item.
FAQ
Yes, BNPL affects your credit score. If you do not repay your BNPL amount on time, then your credit score may get affected, and timely payment improves your credit score.
Yes, you can use the BNPL Payment method to purchase iPhone however, you’ll have to find the merchant website that offers the BNPL payment method.
You can use BNPL services on some of the merchant online portals. BNPL is a fully digital service and you can use it on the merchant website only.
The Buy Now Pay Later method of payment comes with a 30-day time period within which you’ll have to repay the total amount. You can also choose to repay the amount in EMIs at no cost (Only a few merchants).
