What is Buy Now Pay Later?
Buy Now, Pay Later is a short-term financing option allowing consumers to purchase and pay for them at a future date, often interest-free. Also called "point of sale instalment loans," BNPL arrangements are becoming an extremely popular payment option, especially when shopping online for your needs.
How does Buy Now Pay Later (BNPL) Work?
Buy Now Pay Later (BNPL) programs are unique and have different features. Though each company has its own terms and conditions, point of sale instalment loans operate along the following lines:
- You make a purchase at an Online/Offline store and choose Pay Later at checkout.
- If approved, you make a small down payment of the overall purchase amount, which depends on your credit rating score.
- You then repay the rest of the amount due in periodic interest-free instalments.
- The payment can be automatically made via a check or bank transfer, debit card, bank account, or credit card.
How is BNPL different from the Traditional Credit Cards?
BNPL is different from making a purchase with a credit card, despite the fact that they both involve delayed payments. You should make the minimum payment due on the card each month while you use a credit card to pay for your purchase. Unless you have zero annual maintenance charges, interest will keep on accruing on the remaining amount until you repay the amount. However, balance can be carried on indefinitely.
BNPL arrangements, in contrast, usually are free of any interest on maintenance charges. However, they have a fixed repayment schedule that is, in normal circumstances, several weeks or months. When the due date of payment is near, the BNPL provider notifies you of the amount. You can compare the same with unsecured personal or consumer loans.
Advantages of using Buy Now Pay Later (BNPL)
- Better than credit cards in cost-saving:
What attracts the consumers to BNPL is the absence of Interest and Fees. BNPL companies can smoothly eliminate short-term borrowing costs for consumers by charging merchants a fee. The non-appearance of interest and default caps on late fees also incentivizes providers against allowing unpaid balances or rolled-over debt, as is often the case with credit cards. Providers are those who prefer to spur greater usage but with timely repayments. Users typically are barred from making further purchases if they leave an instalment unpaid.
- Assist with finance management and making important purchases.
The vast majority of BNPL customers surveyed use these products responsibly and in ways that benefit them financially. Respondents would prefer BNPL for things that they need than for discretionary items, defying the myth that these services exist primarily for superfluous purchases. Moreover, people with a lower economic position are just as likely as wealthier people to use BNPL for important purchases. Consumers across all types of economic standing are beginning to depend on BNPL to manage their finances and put essential items within reach.
- Life can be more affordable and convenient.
BNPL has been becoming a necessary course of finance to make a range of goods and services more affordable. "Couldn't afford the full price of a purchase upfront" is the most common reason to buy through BNPL. Buy Now Pay Later has high discounts and offers running with its services which serve great benefits to buyers as well as the sellers.
Precautions while using Buy Now Pay Later:
A BNPL facility is a loan that needs to be repaid in full on time to avoid penalties and an adverse impact on credit scores. The access to credit that is quite hassle-free, with no interests or a growing list of partnering merchants, shouldn't encourage them to spend recklessly. As for that, they should exhibit financial discipline and thoughtfulness while using BNPL services.
Is Buy Now Pay Later the right choice for your shopping desires?
An appreciable minority of BNPL users feel anxious about being able to repay and that BNPL can encourage unnecessary spending. If you can overcome this, it is the correct choice for you and the embarrassing no money moments.