Things to consider before obtaining instant loans under the BNPL program

Many of us are eagerly awaiting the holiday offers to make big purchases. This is also the time when companies offer great deals and discounts to encourage their customers. While many people have credit cards to make the most of these offers, for those who do not have access to formal credit due to a lack of credit history, the option is to buy now, pay later or at the BNPL facility.

BNPL has recently become a popular payment method as it allows its customers to divide the total cost of the purchase into monthly installments using the facility. Here, payment is made by the BNPL player to the merchant, which is then refunded by the customer in the form of zero cost IMEs.

“BNPL is a kind of instant, no-cost funding that has grown in popularity, especially during the Covid-19 pandemic. These short term loans are also popular with consumers who are not normally eligible for credit or financing but still want to take advantage of them, ”said Ashish Misra, COO, Retail Banking at Fincare SBF.

Simpl, LazyPay, Amazon’s Pay later, Mobikwik Zip, Paytm Postpaid, ZestMoney and Early Salary are all examples of fintech players promoting this new digital line of credit to retail customers.

Types of BNPL

There are mainly two types of digital players in the market: payment financing and transaction financing. For example, in the case of BNPL players like LazyPay and Simpl, you don’t have to go through the long process of adding credit cards or money to the wallet or waiting for an OTP. You can simply accumulate all your invoices and pay only one invoice after a certain number of days, which will be transferred to the BNPL account. “Payment finance players are generally integrated with smaller merchants like Swiggy and BigBasket where the average ticket size is much smaller. They kind of give their customers cash advances without needing any KYC documents, ”said Vimal Saboo, Commercial Director, EarlySalary.

Then there are players like CapitalFloat, ZestMoney, and EarlySalary that allow users to buy online and pay later through EMIs. “We offer transaction finance for large purchases from merchants, including the purchase of an insurance policy, where reimbursement can be made in IMEs. The average ticket is much higher, up to Rs 1 – Rs3 lakh, because we are supported by NBFC. Additionally, in accordance with RBI regulations, we require customers to upload their KYC details, ”Saboo said.

What to know before taking advantage of the BNPL facility

Since it is the start of the holiday season, many of us are tempted to make big purchases. But, before you enjoy that easy money, here are a few things you need to know about the new line of credit:

Interest rate

Most BNPL programs are available on interest-free credit, as FinTech companies tend to pass on the discount merchants get to customers in the form of zero-cost IMEs. The interest-free period can vary from 15 to 30 days, beyond which the customer has the choice to pay in one go or in several installments.

However, with few transactions for which no incentive could be offered by traders such as paying an insurance premium, the BNPL player can charge 15-20 percent per annum of the amount. Likewise, in the case of payment financing players, all online expenses are consolidated into a single account, the balance of which must be paid every 15 to 30 days.

What if you are default?

There are two types of fees that you are charged if you miss the payment. First there is the late payment fee which can range between Rs 500 and Rs 1000, then there is the penalty interest rate of 2-2.5 percent per month. “Depending on the type of plan you choose, there will be higher fees and interest if you end up not paying the installments on time,” Misra said.

Can the merchant blacklist the defaulting customer? “The merchant has no say in the financing of the transaction. Usually, lenders have no recourse on traders. So traders won’t go back to the consumer, ”Saboo said.


You may have difficulty obtaining a refund for an item you have purchased, whether it is defective or unsatisfactory. It is therefore important to be sure of what you want to buy, as traders may have terms and conditions when it comes to canceling or returning the product. “Sometimes the finer details of these loan programs are not clearly understood or transparent and one may be able to easily access help if something goes wrong,” Misra said.

Finally, given the easy access to money, there is a risk of getting carried away and gorging. Therefore, it is always advisable not to stretch too much and buy more than you can afford.

Rosalie M. Dehner