EJ Explains: 'Buy now Pay Later', is it really a good offer?

Buy now Pay Later(BNPL): Imagine this situation: You’re craving to proceed from your shopping cart, but you know don’t have enough money to cover the cost of your items. You could wait until you get your next paycheck or you could use a ‘buy now, pay later’ loan to pay for your shopping list?

What is 'Buy Now Pay Later(BNPL)'?

As consumer expectations have shifted away from traditional lending and payment products toward low-cost or free services with convenient, Buy Now Pay Later as it reads allows the customers to buy the product they need on loan and can pay the amount later.

BNPL has emerged as a more convenient payment method essentially decreasing the financial burden on borrowers by offering no-cost EMIs. The options can be found on food delivery, travel booking, grocery and other essential delivery platforms too.

Who is offering this Buy Now Pay Later(BNPL) option?

Given the tons of BNPL apps in the market, it may get difficult for you to decide which one to opt for. Several startups such as LazyPay, Simpl, ZestMoney, and ePayLater, Felxmoney operating in this space have changed the way credit works in India.

Apart from these, traditional banks have also forayed into the segment such as HDFC Bank’s FlexiPay and ICICI Bank’s ICICI PayLater offerings.

Credit cards vs Buy Now Pay Later(BNPL): The better choice

While BNPL options apply only to a specific purchase from a specific merchant, credit cards can generally be used anywhere to make many types of purchases.

If you have a credit card, you have to pay at least the minimum amount due at the end of the month. However, with buy now, pay later, you might have a three-, five- or 12-month option. This means that while BNPL can offer more flexible terms, credit cards generally will offer more flexible acceptance.

But is it a good option?

Even with all the benefits and attractive features, there are things to Know Before using lay later offers-:

• Buy Now Pay Later should be used only when you can repay in time, not for free money.

• Your eligibility to get a credit line is based on your credit score, relationship with these apps, and other factors.

• Delaying the repayment can cost you a hefty late payment fee and unwanted charges, including an exorbitantly high-interest rate.

• Missing even a single payment can reduce your credit score, impacting your future ability to take loans.