Buy Now, Pay Later in India: How it Works and How to Make the Most of it

The concept of “buy now, pay later” is gaining popularity in India, with more and more companies and platforms offering deferred billing options to customers. But what exactly is buy now, pay later, and how does it work in India? In this post, we'll explore the ins and outs of this financing option and offer tips on how to make the most of it.

What is BNPL concept?

This concept, also known as deferred billing or installment payments, allows customers to purchase goods or services and pay for them over time, rather than paying the full amount upfront.

Companies like ZestMoney, Zip by mobikwik, and Lazy Pay partner with e-commerce websites and merchants to offer customers the option to pay for their purchases in installments, typically over a period of 3-12 months.

How does the process of using BNPL to make a purchase work?

When you come across a merchant that partners with one of these companies, you'll have the option to select buy now, pay later at checkout.

You'll then be prompted to apply for financing through the company's website or mobile app. After a quick credit check, you'll be approved for a certain amount and can use that to make your purchase.

The installment payments, along with any associated interest and fees, will be automatically deducted from your bank account.

How can you make the most of buy now, pay later options?

First, comparison shop for the best interest rates and fees. Not all companies are created equal, and it pays to do your research.

Buying something now and paying for it later can be tempting, but it's important to make sure you can afford the payments.

Make sure to make payments on time. Late payments can result in additional fees and harm your credit score.

Finally, use buy now, pay later options only for necessary or planned expenses. It's easy to overspend when you're not paying upfront, so it's important to be mindful of your spending.

Benefit of Buy Now, Pay Later (BNPL)

This type of financing can come with many benefits for consumers including:

1. Affordability: BNPL allows consumers to make purchases they may not be able to afford upfront, making it possible for them to access goods & services they might not have been able to otherwise.
2. Flexibility: BNPL offers a variety of payment options, including monthly or bi-weekly payments, which can make it easier for consumers to manage their finances.
3. Credit building: BNPL can help consumers build their credit scores by making timely payments. This can be especially beneficial for those who are new to credit or have a limited credit history.
4. Convenience: BNPL is offered through a variety of platforms, including e-commerce websites and mobile apps, which makes it easy for consumers to access and use.
5. Increased sales: BNPL can also benefit merchants as it can increase sales by making it easier for consumers to purchase goods and services.

Disadvantage of Buy Now, Pay Later

BNPL does come with some potential disadvantages for consumers. Some of these include:

1. High costs: BNPL can come with high interest rates and fees, which can make the overall cost of the purchase much higher than if the consumer had paid for it upfront. Normally they charge 24% to 48% interest.
2. Increased temptation to overspend: BNPL can make it easy to purchase items that a consumer may not be able to afford, leading to overspending & potentially getting into debt.
3. Missed or late payments: Missed or late payments can lead to additional fees and damage to credit score. They charge 200 to 500 for late payment.
4. Limited options: Not all merchants offer BNPL options and consumers may be limited in their choice of where to shop.
5. Credit check: Almost every BNPL services require a credit check which can affect the credit score of the consumers, who may have a low credit score.
6. Lack of transparency: Some BNPL providers may not clearly disclose the terms and conditions, interest rates and fees, which can lead to confusion and dissatisfaction among consumers.

It's important for consumers to be aware of these potential disadvantages when considering a BNPL option, and to make sure they understand the terms and conditions before making a purchase. It's also important for consumers to make sure they can afford the payments and to use BNPL options responsibly to avoid overspending and getting into debt

It's important to note that, BNPL services typically charge interest and fees for their services, so it's important for customers to carefully review the terms and conditions before making a purchase. Additionally, it's also important for customers to make sure they can afford to make the payments before taking on debt.

In conclusion

Buy now, pay later can be a useful option for consumers looking to make a purchase they may not be able to afford upfront, it's important to be aware of the potential drawbacks.

Interest and fees can be costly and can add up quickly. Additionally, missed or late payments can harm your credit score.