Get something now without spending a penny from your pocket! Cool, isn’t it? Especially when this hectic competitive market doesn’t pay you enough, this idea helps. But Is it good? Is it worth it? Or is it just one of those ethical scams that somehow bound the consumers for a long time? Scrolling through the article to finally find the answer if buy now, pay later is a good idea for consumers!
Growth Of BNPL During Covid
Covid-19 has been a big hit for everyone and majorly in terms of finance when it comes to the middle class. A majority of people because of this lack of financial stability have started adopting the BNPL system.
Another reason Covid-19 has been a huge reason for individuals shifting to online transactions and hence the demand for BNPL in form of the easy loans.
Is This A Viable Business Model?
In a summarized manner NOT REALLY! The BNPL companies as per their current business models have a very high volume and a very low business margin along with highly sensitive finding costs which when combined do not result in a high profit.
BNPL has become a market with a lot of competitors which in general makes it difficult for people to survive in the market. Another reason is the fees that get late due to the direct consequence of loose underwriting causing high credit losses.
Pros And Cons Of BNPL
Pros:
It's a convenient and disciplined way to pay for things over time.
Frequently have a cheaper interest rate than credit cards.
It is not necessary to have good credit or a high credit score to qualify.
Acceptance in a timely manner.
Cons:
Payments can be difficult to keep track of.
Late fees and a worse credit score arise from missed or late payments.
Purchases yielded no incentives or cashback.
Even if the item is returned, payments may continue.
Companies Offering BNPL
Some of the companies which are good BNPL players in the US are:
PayPal
Affirm
Split It
Sun Bit
Amazon Pay Later
Apple Pay
Risks Of BNPL
Talking about the risks of BNPL, one of the major risks is the late fee, in itself, a major disadvantage since it is the very financial problem due to which the consumer opts the option of BNPL, that benefit becomes nullified because now they'll have to pay more, and this late fee can keep on piling up.
Another one is damaging your credit score, even though BNPL is a great option for people with bad BNPL scores but in long term, it might result in bigger problems since BNPL might worsen your credit score.
The third one is the lack of government oversight, since BNPL is in some ways on the red flags it can be said that the federal government consumer watchdog is looking into them.
Conclusion
In terms of having something you want at the very moment yes BNPL is a good idea for consumers, but when it comes to the fine print, that is the problem.
BNPL might provide you with what you want but it then affects your overall credit as in case the payments do not remain affordable to you the penalties which you’ll have to face might be really bad.
So, going ahead with BNPL is only acceptable when you can afford the thing and you really require it at the moment.
