Buy Now Pay Later model: Here’s all you need to know about it

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Buy Now Pay Later (BNPL) is a new type of line of credit. Under this facility, fintech firms offer schemes that allow an individual to borrow a certain sum of money which can be repaid according to convenience or the limit set out by the company for you.

Usually, companies providing this  mode of credit decide on your repayment date, the amount of credit, repayment date and if a late fee should be levied or not. All of this solely depends upon your credit history. Are you someone who pays dues on time? How many times have you paid your late fees? How frequently you use these applications services?

If you miss any of your payment in BNPL model, then the organisation from which you have taken credit from will ask you to pay your due by constantly giving you reminders through messages, emails, even calls and would start charging you based on your due date. If even after that you unable to pay the due then the institution would block you from using their services indefinitely.

How does BNPL work?

It provides instant credit without any hassle and repayment is to be made after a specified period of time. It is convenient as well as interest-free compared to its substitutes. It is a big draw for small ticket size purchases. For instance, for smaller purchases like going for a movie which may typically cost Rs 200-Rs 1000 or for Swiggy or Zomato orders, people may use BNPL option. However, on the downside, the fear of increasing debt remains.

The process

You can either download apps like Zestpay, Simpl. etc or the more prominently used option used by most of their customers is through online merchants. For example, if you like a pair of headphones on Flipkart and the portal has a partnership with a BNPL service provider, you can opt for the service during checkout. You just have to download an application and fill the registration details. For those who miss timely repayments, there is a late fee model.