BNPL is good! But why do many people call it predatory lending?

Do you love shopping? Who does not? However, it is a pleasure only when your pocket is warm. Otherwise, in no time, it can turn into a nightmare! Imagine ordering an ice cream tub and suddenly finding your credit card not working. How will you convince the person at the counter? Only the BNPL scheme can be your messiah at this juncture. Many fintech companies offer such options nowadays.

What is BNPL?

The word stands for a payment option called ‘Buy Now, Pay Later.’ This method allows you to make purchases immediately. The lending company will issue a bill with a payment schedule, which you can clear in installments over time.

For many people, this can appear angelic. Again, for some, it is alarming! But why? What is the controversy? Let us dive in!

Why BNPL Is Pretty Neat:

Suppose you have found a high-end Dell Laptop that you need right now for your new remote job. Your bank account is not giving a positive signal. However, your payday is not far away. You know you can manage a loan. It is where Buy Now Pay Later can help. It is beneficial because,

• It will allow you to spread the cost of your manageable and interest-free purchase into monthly installments.

• It will not ask for the full amount at the time of your purchase. So you will have room to make more purchases.

• You can improve your credit score when making on-time payments. Moreover, certain BNPL providers report to credit bureaus.

• It will allow you to regulate your spending. So you can maintain your budget.

How Can BNPL Become Predatory Lending?

Though BNPL is good and appears to be user-friendly, there are loopholes. Be careful, or you may have to pay more than the buying price. Let us see how.

• The BNPL providers may have high late fees, interest on outstanding balances, etc. As a result, your repayment amount may become high. So, you must know all the terms and conditions before choosing this option.

• BNPL can lead you to a debt trap if you do not know how to manage your expenses. In such cases, you will be in constant debt while struggling to repay.

• Late payments may affect your credit score.

Is BNPL Good? Or Is BNPL Bad?

This payment option is like a sharp kitchen knife. If used by a responsible chef, it can create culinary wonders. However, if it goes into the hands of a less attentive person, it can lead to a nasty cut. Similarly, BNPL has both good and bad sides.

It is good when,

• You want it for budget-friendly purchases.

• You are sure you can repay the entire amount on time.

• You have an in-depth understanding of the terms and conditions.

It is not good when,

• You use it to buy unnecessary things.

• You do not understand the terms & conditions and pay more than you borrowed.

• You are under financial stress, and BNPL appears to you as an ‘easy money’ option.

Conclusion: 

Undoubtedly, BNPL is a fantastic tool for immediate purchases as long as you know how to use it wisely. Rather than becoming a predatory beast, it can act as a stepping stone for finances if you act responsibly and maturely! Always keep your financial future secure.