What is Buy Now Pay Later (BNPL) Service?

You’ve probably come across offers on e-commerce sites, to ‘Celebrate an occasion by buying something and not to worry about making the payment right away.’ You may have also assumed that only credit card holders could buy so. But then you saw something else, ‘no credit card required.’ Wondering how it works? It’s called Buy now, pay later.

Buy now, pay later is a short-term financing method. This method allows you to purchase a product by leaving an option to make the payment on a future date. After buying the product, you can make the payment in instalments without any interest rate. You can either pay a part of the price when purchasing the product or settle in the future as instalments. Although the BNPL service does not affect the credit score, delay of payment may reduce your credit score.

Many companies offer a buy now, pay later option. Often companies offer this option without interest. 

Did you know?

If you opt for buy now pay later, you can purchase a product with a down payment of only 25%.

How Does Buy Now Pay Later (BNPL) Work?

Different companies have different terms and conditions while offering the BNPL option. But the process of operation of BNPL is almost identical. 

• First, you must select the product and request the Buy Now Pay Later option at the checkout counter.
• After the approval of your request, you will have to make a down payment of 25% on the overall cost.
• After that, you will have to pay the remaining charge in small instalments.
• You can make the payment through credit, debit cards, UPI or directly by bank transfer.

Also Read: Offers on Credit Card Bill Payments - Cashbacks, Rewards Points & More

Differences Between Credit Card Payment and BNPL

Payment via credit card offers you an option to make the payment of the minimum amount due on the card every month. The Buy Now Pay Later option has a fixed amount you will have to pay for several months. Credit card payments will carry an interest rate. But BNPL will not charge any interest in most cases. There is a limit in financing the amount through Buy Now Pay Later. But there are no such limits on Credit Card payments. Therefore purchase of limited products is possible with the help of this option.

Buy Now Pay Later has also become a popular mode of transaction for buying products from e-commerce websites.

Some significant difference between credit card payment and the BNPL option has been mentioned in the table below.

Things To Consider While Availing BNPL Option

It would help if you considered certain things before opting for the BNPL option while purchasing something. 

•  Read the Terms and Conditions Carefully

Before taking the Buy Now Pay Later service, go through all the terms and conditions. You will come across different requirements of different companies. Terms and conditions vary in the case of every company. 

•  Try to Understand the Payment Method

Before taking the BNPL service, you should try to understand the payment method very well. You should know the amount of instalment and fine in case of delay in payment of instalment, etc. When you know all these things, you can compare the benefits of services offered by different companies. It will help you to pick the service of the suitable company. 

•  Return Policy

Under the Buy Now Pay Later return policy, you may be able to return an item. But you may not be able to cancel the BNPL service immediately. You will be able to cancel the policy only after the proper verification by the company.

Also Read: Digital Payment Methods - Types & Benefits of Different Digital Payment Methods

Who Are Eligible to Avail BNPL Service?

You must fulfil some conditions to opt for the Buy Now Pay Later policy. These have been mentioned below:

• You must be a citizen of India
• The minimum age should be not less than 21 years of age
• You must have a valid bank account
• You should link your PAN and Aadhar cards to your bank account.

Advantages of Buy Now Pay Later (BNPL) 

One of the most significant advantages of the Buy Now Pay Later policy is that it allows the customers to purchase an item without charging any interest rate. With the help of this service, you can quickly fulfil your needs. Even if you do not have sufficient funds when purchasing the item, you can get the opportunity to make a payment in the future. Many other advantages will compel you to avail of this service.

•  Transparent Payment Process

Due to the transparent payment process, you can pay the instalment without any difficulty. You can choose the payment process at your convenience. Since all the modern modes of payment are available, you won’t have to worry much. You can also make the payment by paying later apps. But you should be aware of common UPI fraud while paying through UPI. 

•  No Interest Rate

Another advantage of the Buy Now Pays Later service is that you won’t have to pay any interest rate in most cases. The amount will be meagre even if you must pay the interest rate. This is an essential advantage of BNPL as all other loan service has the policy to pay the interest rate.

•  No Requirement of Credit Score

The credit score does not affect the Buy Now Pay Later service. You will not require a good credit score to avail of BNPL service. You won’t be deprived of this service if your credit score is low. You can avail of this service even without any credit score. 

•  Easy Approval

You can get approval quickly once you opt for the Buy Now Pay Later option. Unlike other loan services, you won’t have to go through many requirements to get approval for the BNPL service. 

Also Read: How do You Add a Credit Card to Google Pay?

The Disadvantage of Buy Now Pay Later (BNPL) 

Like every other service and policy, BPNL also has its disadvantage. If you become aware of these advantages, you can prevent difficulties while availing of the service.

•  Late Payment Leads to Extra Fee

A delay in the payment of instalments may require you to pay an extra fee. Even if you do not need to pay the interest rate, the cost of the extra expense may cause you trouble. Therefore, you should pay the instalments on time to avoid an additional payment.

•  No Reward

There will be no reward or cashback facility on purchasing a product. Therefore you cannot expect additional benefits after purchasing an item on Buy Now Pay Later option. But other loan services like credit cards offer rewards and cash back facilities.

•  Continuity of Payment

Another demerit of the Buy Now Pay Later option is that you may have to continue the payment even after returning the product. If you stop making the payment, you may have to pay an additional fee. Although you will get your money back, you will have to continue the price until the BNPL lender gets informed of the refund.

All Post: All About UPI– United Payments Interface

Conclusion:

With the help of the Buy Now, Pay Later policy, you can purchase a product immediately without worrying about your fund. Since there is no interest rate, you won’t be in a situation of high debt. However, you should be aware of the price of the product you are buying. You should also carefully review all the terms and conditions to know about the penalty for failing to pay the instalments. Due to the transparency and flexibility, we can expect that more customers will approach to BNPL option in the future.

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