Kolkata: Consume today, pay tomorrow is the underlying guiding principle of the “Buy Now Pay Later” market, referred to as the BNPL sector. According to statista, BNPL transactions in India would be about 13.4% higher in 2025 compared to what it was in 2024. Buy BNPL is a short-term financing option that is designed to boost consumption. It allows consumers to make purchases and pay for them over a pre-agreed period in installments, and often it is accompanied with the bait of zero interest.
Some personal finance experts point out that BNPL is debt packaged in a beguiling way to appear harmless. One of the risks of this model of transaction is that it could make the buyer spend more and lose track of the financial obligations. “Spend First, Think Later” could become a tagline for this as well. Since the deferred payment is used as a bait, one hardly feels the pinch of payments. This is extremely effective to induce impulsive buying.
The need to exercise extreme caution is due to the fact that on a moderate salary juggling a few EMIs might become a severe strain. It’s the youth who typically fall for BNPL, since after they start earning, they are swamped by the impulse to make purchases — buy that dream phone, or a large screen television, or a jumbo refrigerator or a chilling AC machine or even go on a vacation. At that age it is easy to succumb to the impulses of both consuming and not paying immediately.
What is typically forgotten is that defaults in payments — even a single one — can seriously impair the credit score of an individual. Credit score is considered a financial lifeline and if it is compromised, it lowers the score to an extent whereby it becomes difficult for the individual to secure any loan in the next few years. A low credit score can raise the interest rate on home loans, personal loans and car loans. It will bring down the limit of a credit card and can limit the amount of loan any lender might grant you. Moreover, if you are late in payments, you have to cough up penalties.
There is another trap. BNPL can quickly become a habit, almost an addiction. It can easily turn an individual reckless. If we can separate our purchases into needs and wants, BNPL almost always pertains to wants. Therefore, the best option is to resist temptation.
But what’s the different between BPL and EMI (Equated Monthly Installments)? Conceptually they appear to be the same. However, they are different in terms of structure. BNPL usually concerns shorter repayment periods and claim to have interest-free options for specified durations. But EMIs are often linked to longer repayment periods and involves interests, especially with loans.