Buy Now Pay Later: You can do shopping even without money, if the payment is not done on time, the debt burden will increase.

There is a debt trap Buy Now Pay Later scheme, use it wisely, otherwise the entire earning will end in repaying the loan

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new Delhi. Even if you do not have money or credit card, you can easily make purchases. Many e-commerce companies are offering the facility of ‘Buy Now Pay Later – BNPL’. Under this, companies give loans for purchases.

Even if you get a loan for purchase in BNPL within a few seconds. If you do not use it wisely, then BNPL can trap you in debt trap. Experts say that if you do not repay the loan on time, then penalty, late fee, interest rate keep adding to it, due to which your entire income can be lost in repaying the loan.

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High interest like personal loan
Aparna Ramachandra, Founder Director, RectifyCredit.com, says that consumers should understand before borrowing that these fintech lenders are selling personal loans by packaged them in different ways. These loans are expensive and risky. BNPL is like a personal loan, on which the interest is also very high. Companies charge interest up to 24 per cent along with processing fee on BNPL.

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This is how the scheme works
Fintech companies give loans to consumers through the Buy Now Pay Later scheme. There are many fintech companies like ePaylater, LazyPay, Simple, which give consumers the option to shop and pay later. Purchases made in one billing cycle keep on adding up, for which you have to pay later. Through this, the consumer can do small transactions ranging from Rs 100 to Rs 5000. She can make purchases up to Rs 30000 on the profile of the consumer.

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Companies targeting Millennials
This payment option is also available on ecommerce websites like Flipkart, BigBasket, food delivery mobile apps like Zomato and Swiggy, trip booking portals like Goibibo and Cleartrip. Credit scoring consultant Parijat Garg says that these fintech firms are creating virtual facilities like credit card transactions and payment arrangements. These companies are targeting millennials who do not have credit cards.

Offers various types of offers
Fintech companies offer huge discounts, cashback offers and loyalty benefits to attract you. The credit limit is based on the consumer’s past credit history, monthly income, job stability, profession, etc. Epaylater provides credit limit up to Rs.30,000 for retail consumers and up to Rs.2 lakh for self-employed consumers. A customer can sign-up on multiple fintech firms at the same time.

Charges are levied for non-payment
Fintech companies like Simple and Lazypay generate bills twice a month. These companies generate bills on the 16th of every month and on the last date of the month. Purchases made within 15 days of the billing cycle are reflected in the statement. The consumer has to pay the money within 3 to 5 days. Fintech companies charge late fees for late payments.

Understand the calculation of penalty like this
Let’s say SIMPLE’s late fee slab works out to Rs 11.8 for bill amounts below Rs 100 to Rs 118 per billing cycle for bill amounts above Rs 500. The company also charges a late penalty of up to Rs 250. Lazypay charges a late fee of Rs 10 per day. This is subject to a maximum of 30 per cent of the total outstanding amount.

interest on outstanding amount
Interest is also charged on the outstanding amount. Suppose, LazyPay charges you interest at an interest rate of 26 per cent per annum on a daily basis till the day you do not repay the amount. The ePaylater charges interest at the rate of 3 per cent per month i.e. 36 per cent per annum on the outstanding amount. Ramchandra says that if seen in comparison to these Buy Now Pay Later schemes, personal loans of banks are much cheaper. Banks charge interest at the rate of 14 to 18 per cent per annum from the consumers.

Big loss for not paying
Non-payment of dues can damage your credit score.
This makes it difficult to take loans from banks.
Banks do not give you a loan until you pay your dues.
Even if the loan is available, then its rate will be very high.

Tags: banking, Personal finance

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