There are certain times in your life when you may need a short-term loan to fund a purchase or pay a bill. Suppose you lose your smartphone and need to get a new one ASAP because your work depends upon it. But you don't have the funds to purchase one immediately. You may be considering borrowing funds from a friend or taking a personal loan. Well, there is a third option you can consider - the Buy Now Pay Later scheme - which comes with significant advantages.
In this blog, we explain the Buy Now Pay Later (BNPL) scheme, the difference between credit cards and BNPL, and the advantages of the BNPL scheme.
What is the Buy Now Pay Later scheme?
The Buy Now Pay Later or BNPL scheme empowers you to get access to a wide range of products by paying just 25% or less of the product's value upfront. The rest can be paid in instalments. You can also use the scheme to pay utility bills.
In effect, it is a short-term loan with an interest-free period. If you pay back the full amount as per the instalment dates or within the interest-free period, you will not be charged any interest.
How does BNPL work?
You essentially enter into a contract with the BNPL service provider to purchase products such as FMCGs, consumer durables, clothing and electronics on a merchant platform. You may be required to pay only 10 to 25% of the total cost upfront and can pay the rest during a pre-determined interest-free period of 15 to 30 days.
Advantages of BNPL
- BNPL contracts are created within minutes via a hassle-free process.
- You do not need to have a high credit score to get access to the BNPL scheme.
- You can get access to a short-term loan without having to pay any interest, which is the case with a personal loan.
Differences between Credit Cards and BNPL
There are several differences between Credit Cards and BNPL. These are as follows:
(1) Access to credit cards involves an extensive review of your credit history. Credit card companies require a certain credit score to issue a card. They may also review your income history. On the other hand, access to BNPL is simple. Even those with low credit scores and no credit history can get access to the BNPL scheme.
(2) The turnaround time to access credit cards ranges from two to three weeks, while BNPL access happens in minutes.
(3) The interest-free period for credit cards is around 50 days. The interest-free period for the BNPL scheme is between 15 and 30 days.
Also Read: [Save now, pay later or buy now, pay later?]
Future of Buy Now Pay later
BNPL is emerging as an alternative short-term loan option because not all consumers can access credit cards. On the other hand, personal loans come at a much higher interest rate.
In this scenario, the BNPL scheme promises to be an attractive option for cash-strapped consumers. However, always ensure that you pay your dues on time to avoid going into debt.
Conclusion
If you need to take a short-term loan, Axis Bank enables you to take advantage of the Buy Now Pay Later scheme via Freecharge Pay Later, which allows you to get instant credit of up to ₹10,000 per month. This is a hassle-free, one-click payment experience that can be used to make purchases or payments through Freecharge or its merchant and partners. You can also leverage it to make easy mobile, DTH, electricity, landline and broadband bill payments. The credit period is 30 days, within which you need to clear your dues, to avoid being charged interest.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
