Buy now pay later

Buy Now Pay Later – A Detailed Guide

A form of short-term financing known as buy now, pay later (BNPL) enables customers to make purchases and pay for them at a later time, often interest-free. On behalf of the buyer, the BNPL provider pays the merchant in full.

This option is intended for young,  new-to-credit who are pressed for cash and many of whom do not have credit cards. It provides them with simple access to finance for small purchases. The provider’s platform will require a first-time buyer to finish the necessary KYC procedures. In order to understand consumers’ purchasing habits and assess their creditworthiness, BNPL providers use analytics. While the credit amount ranges from Rs 500 to Rs 30,000, with some lenders giving credit up to Rs 1 Lakh, the interest-free duration normally varies from 15 to 45 days.

Key features of buy now pay later

Flexible Loan Amount: 

You can choose a loan with such a buy now, pay later option with as little as Rs. 500 or a higher amount up to Rs. 1 lakhs, depending on your needs. 

Simple application procedure:

The buy now, pay later application process can be done online. You must first complete a straightforward application form. Following the submission of the required documentation and in accordance with the eligibility requirements established by the lender, the loan is then approved. The processes may vary depending on the lender.

Shop at Top Retailers:

Digital lenders’ buy-now, pay-later options can be utilized to make purchases from the best physical and online stores, like Amazon, Flipkart, BigBazaar, etc. The majority of these companies occasionally offer the finest prices, and buy now, pay later enables you to take advantage of the best offers when they become available.

No Cost EMI: 

Most buy now, pay later arrangements incorporate practical repayment methods, retailer- and often purchase-specific EMI deals. It is crucial to be aware of the terms up front because some lenders may impose a nominal interest rate.

Flexible tenure: 

Buy now, pay later terms are flexible and might last anywhere between a few days to several months. Depending on your ability to repay, lenders typically provide variable terms for buy now pay later transactions.

Minimal documentation:

Buy now pay later loans disburse quickly, often in just a few minutes, and require nothing in the way of documentation. Occasionally, the disbursal period may change based on the applicant’s profile.

Exciting offers: 

There may be additional offers, like cashback, discounts, etc., when buying on a partner retailer’s website or in-store. These are occasionally in addition to any offers made by the retailer.

How Buy now pay later works?

Buy now, pay later all programs differ slightly from one another. Although each business has its own terms and conditions, point-of-sale installment loans typically work in the manner described below:

  • You choose the buy now, pay later option at the checkout when making a purchase at a participating shop.
  • You put down a little amount of money as a down payment, say 25% of the total purchase price, if you’re authorized (you’ll know in a matter of seconds).
  • The remaining balance is then paid in a series of interest-free installments.
  • Payments can be made by cheque or bank transfer; they can also be automatically debited from your debit card, bank account, or credit card.

Although they both require delayed payments, BNPL is distinct from using a credit card to make a transaction. You are only required to pay the minimum monthly payment due on your credit card when you use it to make purchases. Until you pay off the balance in full, interest will be charged on the outstanding balance (unless you used a card with a 0% introductory APR). However, a balance can be carried indefinitely.

In contrast, BNPL agreements often don’t levy any fees or interest. However, they have a set repayment schedule that is usually a few weeks or months long. Each time, the cost is disclosed up front, and it is typically the same sum. It is similar to any other unsecured personal loan or credit card.

It’s possible that not all purchases qualify for buy now, pay later financing. Additionally, the amount you can finance in this way might be restricted. But with the growth of e-commerce in general, buy now, pay later became a more common option for paying for smaller online transactions.

Eligibility for buy now pay later

You must meet the following requirements in order to use the Buy Now Pay Later option:

  • You must be a resident of India.
  • You need to reside in a significant tier 1 or tier 2 city.
  • You must be aged more than 18 years. In some circumstances, the eligibility maximum age is 55 years old.
  • You must be a salaried employee.
  • You must be in possession of a bank account and all necessary KYC paperwork.

Benefits of Buy Now Pay Later

Buy now pay later has many benefits to customers and business owners. Some of the benefits are described below:-

Benefits To Customers:-

The majority of customers love the concept of having immediate access to the goods they need without having to pay for the entire purchase up front.

Additionally, having a BNPL provider is more desirable than using a credit card if they give zero-interest financing.

The majority of the time, BNPL service providers will just conduct a soft credit check, which has no effect on the buyer’s credit rating.

Additionally, this can be advantageous for customers whose credit concerns have prevented them from obtaining other forms of financing.

Depending on the provider, customers have the choice to purchase goods and pay for them over flexible terms ranging from 3 months to several years, which enhances and improves the customer experience.

Even before making the whole money, they can still get their stuff. Compared to credit cards, sign-up takes much less time, and the payments are interest-free.

Benefits To Business Owners:-

Business Owners selling high-priced goods or low-priced goods who wish to boost conversions, cart sizes, attract new customers, and retain current ones adopt the BPNL approach.

Increased sales value

One of the major benefits of offering BNPL is increased sales revenue. By including this payment option, you can increase the amount of purchases you close compared to when there are more abandoned shopping carts on your e-commerce site

New customers

You also make your products more accessible to a wider market by dividing the payments. By doing this, you might sell more expensive things and draw in younger clients who might not have the same purchasing power. Additionally, this frequently results in an increase in the average order value (AOV).

Improved client experience

Additionally, by providing BNPL, you can improve the user experience. Offering various payment periods can provide customers the feeling of empowerment they need to make the purchases that will make them the happiest. Customers who are happy with their purchases are more inclined to do so in the future, thereby increasing your recurring revenue.

Drawbacks of buy now pay later

In Spite of many benefits of buy now pay later there are many drawbacks of buy now pay later facility some of them are described below:- 

Drawbacks To Customers:-

No perks and rewards

There are no benefits or rewards offered with this financing option, and it doesn’t assist purchasers in establishing good credit. Additionally, there can be a delay in completing the refund if the customer decides to return the goods.

Even if they have submitted their return, they must continue paying until the issue is resolved in order to prevent being marked for default.

Financial Troubles

Although BNPL offers instant satisfaction, consumers should always exercise caution when taking on unsecured debt.

Drawback to Business Owners:-

Increasing Cost

One of the major concerns is frequently paying fees of up to 8%. However, many businesses discover that the growth in sales is more which makes up for this additional expense. Nevertheless, it’s a good idea to consider this additional cost while making your choice.

Difficult To Implement

Additionally, some shops discover that it’s more difficult than they anticipated to incorporate the BNPL payment option into their existing sales system. You would need to pay extra for the required equipment and technology, and you might need to employ a specialist in e-commerce websites to assist you with the setup.

Eligibility Criteria

It’s important to keep in mind that not all firms will be eligible. The firms that many BNPL providers work with are authorized. You might not be able to add BNPL to your shopping if you don’t match their minimum requirements. A few sectors, including the gaming and tobacco industries, also prohibit participation in buy now pay later.

Compare Buy Now Pay Later vs Credit Card vs Personal Loan

Below are some of the key distinctions between BNPL and personal loans:-

Buy Now Pay LaterPersonal Loan
The maximum loan available is Rs. 1 lakh.The maximum loan amount granted may exceed Rs. 25 lakh.
All offered loans are secured.Loans secured and unsecured both are available.
There is no interest charged on the principal sum.On the amount of the principal, interest is charged.
Use is restrictedThere are no limitations on how the funds may be used.
90-day maximum durationA maximum tenure of 60 months may be offered.

The “Buy Now, Pay Later” method and credit cards differ in a few key ways. Let’s look at them now:

Buy Now Pay LaterCredit Card
BNPL follows a transparent and low-cost pricing modelCredit cards are subject to unforeseen charges.
credit history is not required.To obtain a credit card, you may or may not have a credit history, not mandatory.
Some e-retailers and fintech companies offer BNPL services and facilities.More acceptance options are available with credit cards.
Easy approvalsObtaining approvals can be a little challenging.
You must make the fixed EMI payment on the specified day.You can choose to merely pay the “minimum due” sum.
On purchases, you don’t have advantages like  cashback, reward points, and air miles.On purchases, you can earn cashback, reward points, and air miles.

You must be in possession of a bank account and all necessary KYC paperwork.

FAQ related to Buy Now Pay Later

Are interest rates high on Buy Now Pay Later?

You will need to pay interest on the BNPL.

The interest charged is determined by a number of variables, including the amount spent, the length of the payback period, the credit score, etc. Some businesses offer a grace period where they don’t charge you for credit. You won’t have to pay interest on the amount if you are able to repay it within that time frame.

Do banks offer BNPL Facility?

Yes, banks like Axis Bank, Kotak Mahindra, ICICI Bank, and others provide their clients with the BNPL facility.

Is Buy Now Pay Later a instant loan?

Yes it can be considered an instant loan because customers who use Buy Now Pay Later can pay their purchases in EMIs, it can be seen as a form of installment loan. In the event that they don’t pay back the money on time, interest is applied at a specific rate.

What is the minimum and maximum amount that I can get in a BNPL?

You can get a buy now pay later as small as Rs. 500 The maximum loan available is Rs. 1 lakh.

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