Buy Now, Pay Later (BNPL): Meaning and How Does It Works

Earlier, there were only a handful of options to make a payment after purchasing something online. As more types of credit transactions take place in India, the Buy Now Pay Later options follows suit for most. According to a report by the India Times, 14% of e-commerce transactions are through BNPL. Currently, there are 22-25 million BNPL customers in India, and the number is set to reach 90-100 million by 2026. However, if you are new to the concept, read on to learn more about BNPL's meaning and working.

What is Buy Now Pay Later (BNPL)?

BNPL's full form is Buy Now Pay Later, which allows buyers to make purchases without paying the costs upfront. It is a kind of interest-free instalment payment service that splits the cost into equated monthly instalments, the first of which is due at the time of checkout. You must pay the remaining instalments through your debit card, credit card, or bank account till the transaction is complete. This is one of the flexible credit options for purchases now widely available online.

How Buy Now, Pay Later Works?

The online finance system of Buy Now Pay Later India works in the following manner:

• Browse through your favourite online store, choose the desired item, add it to your cart, and proceed to pay.
• At the checkout page, choose the shop now pay later loan or BNPL option.
• Provide a few necessary details and let the provider perform a soft credit check.
• Make the payment after approval.
• Enjoy flexible payment plans for shopping, with easy instalments.

Eligibility Criteria for Buy Now Pay Later

Now that you know what is BNPL, check out the BNPL eligibility criteria and requirements to qualify:

• Indian citizenship 
• Residence in a major Indian city
• Minimum and maximum age requirements according to the provider's policy
• Income regularity
• Bank account with KYC verification

What Is the Interest Rate on a BNPL Loan?

While many providers offer interest-free instalment payment services, some charge a nominal fee based on your credit score, repayment history, income regularity, and other factors. That is why they conduct a credit check before approving your BNPL request. Always check if your chosen BNPL services for instant buying include any hidden charges.

Pros and Cons of Buy Now, Pay Later

Like any other payment system, BNPL also has pros and cons. These include the following:

Also Read: Personal Loan, Credit Card or BNPL- Which Is the Better Option to Go For?

Difference Between Buy Now Pay Later and Personal Loan

While many may confuse a Buy Now Pay Later scheme with a personal loan online, these are the differences between the two: 

BNPL is more of an easy instalment payment system in India, while personal loans offer greater flexibility for large expenses.

The Future of Buy Now, Pay Later

The future of Buy Now Pay Later is promising as it is attracting an increasing number of customers to make purchases instantly. Most service providers offering this facility allow easy repayment in EMIs, making them a preferred payment option for buyers. However, it is still a type of loan that you must repay within the pre-determined tenure. Owing to its increasing popularity, the future of BNPL looks good, provided that customers use this facility properly and clear their dues on time.

The market is set to grow significantly in the next few years, driven by increased demand and easy accessibility. BNPL’s Gross Merchandise Value is expected to grow significantly in the coming years, making BNPL services popular for instant buying among customers.

Conclusion

Now that you know what the Buy Now Pay Later option is, you can make your desired purchases immediately and pay them off over time. When considering this scheme, carefully understand the BNPL eligibility criteria and requirements and prioritise timely repayments. If you are looking for an alternative, download an instant personal loan app on your smartphone and get instant access to funds when you need them the most.

Also Read: Is Travel Now, Pay Later A Smart Way To Finance Trip

Frequently Asked Questions

1. How do I qualify for Buy Now Pay Later services?

Fulfil the provider’s eligibility conditions to qualify for their BNPL services.

2. Are there any fees associated with Buy Now Pay Later?

Interest rates, BNPL fees, service charges, etc., are a few fees associated with a BNPL scheme.

3. Can I use Buy Now Pay Later for any type of purchase?

You can use a BNPL scheme to make almost any purchase at checkout.

4. Is my credit score affected when using Buy Now Pay Later?

Your credit score does not get affected by BNPL. However, missing the repayment may affect it negatively.

5. Are there alternatives to Buy Now Pay Later?

Credit cards, Personal Loans, etc., are a few alternatives to Buy Now, Pay Later.

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