How to Choose Between BNPLs, PL and Credit Cards

Nowadays, a complete change is seen in lifestyle and consumer preference. Especially after the lockdown phase of COVID19, customers nowadays are mostly the next generation and millennials who want instant credit which is easily obtained without any hassle and also want it to meet day to day and emergency expenses. This builds up a strong need for the different credit services, but here Buy Now Pay Later (BNPL) services is at the top of the chart while providing financial services.

What is Buy Now Pay Later (BNPL)

The credibility of BNPL is quite different compared with the credit cards and personal loan services provided by banks or other lending institutions.

In India, buy now pay later is a financial service that allows you to pay for your purchases later. This allows you to avail small loans that are repaid within a few days. The best part about BNPL is that you don’t have to pay anything. Companies that offer these services include fintechs, lenders, banks, and other financial institutions. 

How does Buy Now Pay Later Works (BNPL)

The basic structure of the process remains the same but it might slightly differ from lender to lender. It provides the convenience of getting it now and paying back a few days later, with the permission of the service provider. For this, you can choose your favourite e-commerce platform or your preferred bank. Even customers with bad credit scores can use the BNPL site. There are many online websites that provide these features. To take advantage of the increasing demand for BNPLS, many merchants and lenders have partnered to offer this tool and make it widely available. You must have seen some eye-catching “buy now, pay later” ads these days, promoting various plans that cover all your bills from small to large, like cinema tickets, phone shopping, food, refreshments and pretty much anything you might use like cars… from the BNPL scheme.

BNPL vs Credit Cards: Which is better

BNPL vs. Personal Loan: What to Favour

Personal loans have universal financing opportunities with much higher lines of credit as compared to BNPL services. BNPLs are typically non-charging but have steep fees for personal loans. BNPLs come in a revolving credit facility, while one-time personal loans do not offer such a facility.

BNPL services are instant, and during the time of offering, the borrower's creditworthiness is checked, and hence it may take not more than a couple of minutes to offer it. Where in case of personal loans many other factors are taken into account like a customer's age, income, occupation, credit score etc. At times while verifying all these parameters, it might take a couple of months for a personal loan to be sanctioned. It depends on one's requirements, eligibility and repayment capacity whether to go for a personal loan or BNPL.

Credit Cards VS. Personal Loans

Credit cards and personal loans are issued with parallel kinds of creditworthiness. Both services allow you to borrow funds at an agreed interest rate. Many restrictions and rules are implemented, whether for the issuance of credit cards or the offering of personal loans. Not meeting any of these conditions has a very negative effect on your credit rating that much more ruins the ability to get any future credit card or personal loan.

Though alike in nature and having many common attributes, credit cards and personal loans are different. Both are known for unexampled payment conditions as well as balances over the long term. In a personal loan, the borrower gets a lump sum amount directly into the bank account which he has to pay back over a fixed period at an interest rate. Whereas  with credit holders, they are granted pre-approved credit by the bank that issued the card. This implies money will be available to cover purchases on credit. The money then has to be paid back either at the end of the month in full or over time through minimum monthly repayments.

Conclusion

Credit cards seem a better choice as they come with many attractive benefits like higher credit limit and worldwide acceptance. But annual fees, late payment charges and interest levied on it can spoil your entire spending plans. Unlike credit cards, BNPL services offer you smaller, easier and simpler credits at the merchant partners. BNPLs are best for people who are in need of short term micro-credits. If you are not eligible to own a credit card, then BNPL is best for you! Personal loans are needed at times of emergency when a big chunk of money is required to meet some big financial goals. All these BNPLs, Credit Cards and personal loans have their own advantages and disadvantages .You should choose them as per your requirement and priority.