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Borrowers: Treading the Waters of Buy-now-pay-later. Why is It Everywhere?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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If there has been one recent trend or fad among borrowers of credit, it has been the buy now pay later methodology. This mode is here to stay and its recent developments along with its ease of availability have confirmed this. Over the past few months, two of the largest retailers in the country have announced and confirmed their partnerships with buy now pay later providers. This makes payments very easy and convenient for the users, Moreover, the offers provided by these payment plans are unavoidable by the user given how easy they are to use.
Retailers Shift Towards New Payment Plans
In recent times, you may have noticed several companies shifting towards the buy now pay later model. During the checkout process, many brands and e-commerce sites have the buy now pay later payment options available. Not only is it tempting to use these, but they may also come in handy when there is a limited time to complete placing the order. Unlike the traditional layaway, many more consumers can now get their purchases immediately. This also reduced the wait time to complete the payment process. In addition to ease and convenience, many of these buy now pay later applications and companies provide offers and cashback on making purchases through their service.
Moreover, this has not been just a lockdown trend. The introduction of this payment model into the market is here to stay. A survey conducted by Credit Karma shows that 75% of a group of people have used the buy now pay later offer at least twice a month. This was during the initial introduction of this payment plan. One of the main reasons why there was increased use of buy now pay later services were, again, the ease of use as well as the speed of payment.
How Does Buy Now Pay Later Work?
The name buy now pay later is quite self-explanatory. It means exactly what the name suggests. Essentially, this model is the ability to get something now or immediately and pay for what you bought later. There are many different plans offered by a range of different companies. In addition to the different plans, there is also a limit up to which you can borrow. Over time, depending on your use of credit and your repayment habits, the credit limit provided to you may be either increased or decreased. There are also other buy now pay later plans wherein you have to pay one-fourth of the amount at checkout and the remaining amount in installments over the specified time as mentioned by the company.
For instance, if you purchase for Rs. 4,000, then you would have to pay one-fourth of the price, which is Rs. 1,000, at checkout. You can pay the remaining Rs. 3,000 in instalments. One of the main advantages of this plan is that they are accessible to a range of users as they don’t require a high credit score. Many available plans do not charge any interest on the payments to be made. So, you would only have to pay the actual cost of the purchase. However, beyond the due date assigned for the payment, you may be charged a penalty with every additional day of delay.
What To Keep in Mind While Using Buy Now Pay Later?
While the buy now pay later model might be tempting and easy to use, it is important to keep certain things in mind. Here are some of the most important tips that can help you stay disciplined.
In a Nutshell
When it comes to purchasing things, payment processes have also been an issue as they may take time and may also be unsuccessful during certain times. However, the buy now pay later method allows many people to avail themselves of credit irrespective of their credit score. Moreover, this payment method allows users to carry out quick transactions in a convenient manner.
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