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What is BNPL: A Complete Guide to Buy Now Pay Later

Buy now pay later banner

Buy Now Pay Later is an increasingly popular alternative for point-of-sale financing, especially among younger generations.
Early in the 2010s, Buy now pay later solutions arose to solve the pain points of financing, especially complexity and credit cards with high fees and APRs.
As an alternative to credit cards and other types of financing, BNPL solutions were created to enable consumers to buy a product and pay for it over time in a predetermined number of instalments. Customers are frequently offered these options with minimal or no interest rates and hidden fees, so incurring no additional costs.

What is BNPL?

BNPL Full Form: Buy Now Pay Later

Buy now pay later is a method of payment that allows you to make a purchase without using your own funds. Typically, you sign up with a firm offering this service, which then pays for your purchases.
However, if the lender pays on your behalf, you will be required to reimburse the funds within a predetermined timeframe. In contrast to personal loans, no interest is charged under the BNPL programme. You can either pay it in a flat sum or through interest-free Equated Monthly Installments (EMIs). If you fail to repay the loan within the specified time frame, the lender will be required to charge you interest. Further delay could have a negative effect on your credit score.

Buy now pay later

How does Buy Now Pay Later work?

The sole difference between BNPL service providers is the terms and conditions of their services. Here’s how things often work:

  • Purchase from a participating merchant.
  • Choose the option “Buy Now Pay Later.”
  • Make a modest down payment on the whole buying price.
  • The remaining balance will be debited in a series of EMIs without interest.
  • EMIs may be paid via bank transfer, checks, credit card, debit card, or directly from a bank account.

Eligibility criteria for Buy Now Pay Later

The eligibility requirements for the buy now pay later service are as follows:

  • You must be an Indian resident.
  • You must reside in tier 1 or tier 2 metropolitan area.
  • You must be at least 18 years old. In some instances, the maximum age of eligibility can reach 55 years.
  • You must be gainfully employed.
  • You must have a bank account and complete KYC requirements.

Advantages of Buy Now Pay Later

Listed below are some advantages of Buy Now Pay Later:

  • Increases cost-effectiveness
  • Instantaneous credit access
  • Safe and secure commerce
  • Can select the repayment term
  • No cost EMI
  • Simple and transparent process

Credit Card Vs Buy Now Pay Later

There are a number of distinctions between Credit Cards and Buy Now Pay Later. Let’s consider them:

Credit Cards BNPL
Credit cards are subject to hidden fees. BNPL utilises a transparent and economical pricing structure.
A solid credit history is required to obtain a credit card. There is no requirement to have a credit history.
Credit card acceptance is more accommodating. BNPL services and facilities are offered by a select group of e-retailers and fintech companies.
Credit cards typically include an interest-free term. The maximum interest-free credit length is 48 months.
Obtaining approvals is somewhat challenging. Easier approvals.
You can choose to pay only the “minimum due” amount. You are required to pay the specified EMI on the due date.
Cashback, reward points, and air miles can be earned on purchases. No such advantages.

Buy now pay later

Personal Loan vs. Buy Now Pay Later

Below are some of the primary distinctions between Personal Loans and BNPL:

Personal Loan BNPL
The maximum loan amount may exceed Rs.25 lakh. The maximum loan amount is 1 lakh rupees.
There are secured and unsecured loans available. We only provide secured financing options.
The principal amount is assessed interest. The principal amount is not subject to interest.
There are no constraints on the spending of the money. Use is restricted.
A leasing term of up to sixty months may be granted. The maximum duration of 90 days.


The future of buy now pay later might be quite bright, as the concept will entice more people to make fast purchases. The majority of lenders who provide this service provide interest-free EMIs, which are likely to become the preferred method of payment in the future, especially among young people.

However, at its core, it is still a form of loan that the consumer must ultimately repay. Not everyone will be able to return the loan within the set time frame, thus the lenders providing this service will need to exercise caution while extending this option. To avoid interest and a decrease in credit scores, customers will need to comprehend the consequences of late payments. The future of buy now pay later is promising if users can use the service effectively and pay their bills on time.


1. How does BNPL generate revenue?

Ans: Buy now pay later gains from sellers and buyers. Suppliers must pay BNPL 2% to 8% of the purchase price if a consumer uses BNPL. BNPL participants make cash by securing their locations through marketing and promotion, provided the seller can increase conversion or traffic.
Buy now pay later players to charge consumers 10% to 30% interest based on credit score, payback time, etc. On-time payments incur no interest.
Customers who can’t refund the balance by the due date are charged a late fee. Late fees boost BNPL’s revenue.

2. Is buy now pay later a form of instalment credit?

Ans: Yes, a BNPL is an instalment loan because it’s repaid in EMIs. After a certain period, you’ll be charged interest on what you’ve spent, and late payments will entail a penalty. The return period is set.

3. Do you pay interest on buy now pay later transactions?

Ans: Buy now pay later has an interest. Interest rates vary based on the loan amount, term, borrower’s credit score, etc. Some businesses provide credit-free time. If you repay the loan on time, you won’t owe interest.

4. Where can I use the option to buy now and pay later?

Ans: Online and offline stores provide buy now pay later. Buy now pay later can be used to make quick online payments. For Point-of-Sale (POS) purchases, simply scan the QR code to pay. No PIN or OTP is needed (OTP). Only whether the retailer accepts BNPL matters.

5. Does buy now pay later effect credit rating?

Ans: Your credit score won’t be affected if you make timely payments. Your credit score will rise if you pay on time. Missed or late payments lower your credit score.

6. What occurs if I do not pay BNPL?

Ans: If you don’t pay the BNPL amount, the company will keep collecting interest on the debt. If you delay repayment, it may be harder to get loans or credit cards in the future. If you don’t repay the money on time, you may not be able to use BNPL again. Even if you’re allowed, BNPL will charge you a hefty interest rate.

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