BNPL is a revolutionary option in the payment system. It is perfect for retailers and consumers, as it gives them the benefits of a credit card without having to pay any interest or fees on their payments.
Retailers get better conversions, more purchases, and a risk-free return. Consumers have an installment plan that doesn’t ask for interest so that they can afford it easily with their earnings from work or other sources.
In a clear view, the buy now pay later payment option is a boon. However, some underlying issues need to be understood. This article is about the boons and potholes of this short-term financing option.
Possibility of Unsustainable Debt
You may feel tempted to take out a BNPL loan regularly. However, this could lead to unsustainable debt and financial problems that you will have difficulty recovering from.
If you take out a large number of loans in quick succession, your credit score will drop quickly, and it will be difficult to get another loan. This can make it more problematic for you to get another mortgage or car loan later because lenders want their customers to refrain from defaulting on their debts.
A Chance of Credit Score Damage
Credit score damage is a real risk. Your credit score will be damaged if you don’t pay the outstanding amount within the due dates.
On the other hand, BNPL does not increase your credit score if you pay lent amounts in time. Therefore, customers need to be careful and ensure they do not miss any payments during their repayment cycle. Doing so can cause severe problems for them later on down the line when it comes time to apply for new loans or financing products from another lender (such as car loans).
Easy and Convenient Payback Structure
BNPL is a good option for people looking for a payment option that allows them to pay in installments. The ease and convenience of BNPL make it an ideal solution for those who want to purchase out-of-pocket items and make payments over time.
The flexible repayment options offered by the company make it easy for consumers to make their payments on time, even if they have no credit history or bad credit history.
No Strict Eligibility Criteria
If you are not eligible for other credit cards, BNPL can be a great option. The online application process is easy and fast, so most people can be approved within seconds.
For example, if you are studying and have no salary yet, then the lack of strict eligibility criteria is an advantage for your application. It also reduces the risk factor in applying for the loan since more people will be able to avail of it. This is compared to other loans or credit cards that require strict eligibility criteria, such as having an annual income greater than USD 25000 or being employed full-time (or part-time).
Final Thoughts
BNPL is a revolutionary option in the payment system, and it has both risks and benefits. The first benefit of ‘buy now pay later‘ is that it’s perfect for retailers. They get better conversions, more purchases, and a risk-free return on their investment. For consumers, who often want to pay off their debt within a limited period, this system lets them do exactly that.