If you feel like you’ve been seeing the ‘Buy Now Pay Later’ (BNPL) schemes everywhere, that’s because they are. India’s BNPL market is booming and is expected to increase ten-fold in the next four years.
According to Redseer, India’s BNPL market will elevate to $45-50 billion by 2026 from $3-3.5 billion now. In fact, currently, there are already 10-15 million users as per their data. These schemes aim to bridge the gap in consumer lending in India, especially due to the hit our personal finance took during the pandemic.
There are several BNPL players in the Indian market, such as Simpl, ZestMoney, LazyPay, etc. But how do you decide if BNPL schemes are for you? Here are a few pros and cons of such schemes, to help you decide.
Pros of BNPL schemes
Easy to set up, fast payments
“A first-time buyer will simply have to complete KYC formalities on the provider’s platform,” Meghna Jaisingh, a chartered accountant and financial advisor reveals. And that is as simple as it gets. You can apply for a BNPL scheme online and you can get going with your purchase on a partnered platform.
Good for emergency buys
“BNPL schemes find their main target in cash-strapped youngsters who may not have enough money to pay upfront for an emergency buy,” Jaisingh informs. These schemes thus enable you to pay for things without actually borrowing money from friends and family, if you are in a financial crunch.
Makes credit more accessible
“Credit cards usually can be accessed only by those who meet a certain income requirement. They also come with onboarding fees and charge more interest. BNPL schemes allow you to delay payment effectively, without hassles that are associated with credit cards,” reveals Jaisingh.
Cons of BNPL schemes
Hefty late fees
BNPL has a late fee free period, after which you could pay a hefty sum on delayed payments. That will add to your interest and defeat the purpose of opting for a BNPL scheme. If you can avoid late payments, then it is not a bad option. It can impact your credit score too.
Lower credit limit and no rewards
“Unlike credit cards, a BNPL scheme offers a lower credit limit. This makes it feasible for small purchases,” Jaisingh says. If that is your requirement, it shouldn’t be a problem. Unlike credit cards, you don’t get rewards with the usage of BNPL schemes.
Creates a bad debt
Buy Now, Pay Later schemes end up making you indulge in impulsive shopping, causing you to create a bad debt. “If you’re incurring interest and late fee to buy a luxury watch, it is a bad debt because the investment is not giving you any returns,” Jaisingh explains.
Also Read: How To Manage Your Finances This Festive Season