Using Buy Now, Pay Later? You must know this!
It is a festive season, and our digital screens are full of shopping sales notifications. Along with thousands and lakhs of attractive products, there are lucrative finance schemes to make customers’ shopping experiences smooth and memorable. Buy Now, Pay Later is a buzz in the Bazaar, and financial institutions are providing rewarding offers to lure customers into opting for Buy Now, Pay Later. It is essential to understand how it works and the terms and conditions in certain situations.
Financial institutions which are partner with e-commerce companies are the ones that offer Buy Now, Pay Later payment options. This partnership is a win-win for both these entities as it increases sales for e-commerce companies and the customer base for financial institutions. Undoubtedly, the scheme is beneficial and convenient for customers as long as it is utilised appropriately.
Using this option, one can buy products and pay later within a stipulated time without additional interest or processing fees. All it takes is KYC verification through the shopping app by providing valid document details. It is an entirely digital process and takes a few seconds barely. Upon completion of KYC verification, a certain amount is credited to the customer account, which is used for instant payment. The customer can repay the amount as per the terms and conditions. The small amount availed through Buy Now Pay Later can be paid within a given date, and for the higher amount, they offer an EMI option with a predecided time and amount. It is important to note that not all the products are eligible for Buy Now, Pay Later scheme.
Its benefits include quick, easy and often zero-interest payment for EMIs to facilitate instant purchases, zero preclosure charges and zero cancellation charges, etc. The credit is offered without extensive loan eligibility scrutiny, unlike in the case of availing loans from the banks.
The disadvantages need attention since signing up for the option can cause some unpleasant instances unknowingly. Ideally, financial institutions do not report small credit amounts to credit bureaus. However, if the amount credited to the customer is considerable, they may report it to the bureaus, which may reflect in the customer’s credit score report as a loan availed. In either case, if the customer delays or does not repay the amount, it hampers the Credit Score or CIBIL Score. In another instance, if the credited amount is kept unutilised, it still reflects in the credit score report as a loan, irrespective of whether it is used or not, because the customer account is already credited with a certain amount. This outstanding balance results in a lower credit score eventually. Hence, If you are not a frequent buyer, then it is wise to think twice before you opt for Buy Now, Pay Later.
Online shopping is the most common mode of purchasing products and materials across almost all categories. People buy products worth thousands and lakhs of rupees through online shopping apps using various payment options. Knowing the pros and cons of these payment options, weighing the individual need for convenient finances, and deciding wisely on choosing the best suitable option is advisable. Ultimately, temporary convenience should not cause inconvenience in the future.
