Smart Borrowing: What to Check Before Using Buy Now, Pay Later

Consumer spending in India has surged sharply, driven significantly by credit cards and the rising popularity of Buy Now, Pay Later (BNPL) schemes. Even higher-quality borrowers are increasingly turning to short-term credit options for the convenience and flexibility they offer, as was seen during the festive season recently. However, as this trend gains momentum, should you also consider jumping onto the BNPL bandwagon?

Key Drivers Behind the BNPL Boom

According to industry experts, BNPL services offer easy access to micro loans for consumer purchases. The credit evaluation process is quick with minimal documentation requirements depending on the terms and conditions of the BNPL provider. These short-term loans can be availed of in minutes to make desired purchases seamlessly.

“BNPL also allows users to split their purchases into bite-size instalments seamlessly or make the payments at a later date. This allows users to manage their purchases better, especially during festival seasons when there are heavy offers and discounts,” says Adhil Shetty, CEO, BankBazaar.com.

However, a BNPL service should ideally help you manage your expenses better. The easy access to credit and the absence of interest charges shouldn’t encourage you to overspend or indulge in impulse purchases.

Checks To Run Before Availing BNPL

Before signing up for a BNPL plan, consumers should approach it as they would any formal credit product. The most critical step is to read and understand the terms and conditions carefully, particularly around repayment tenure, interest charges post-grace period, and late payment penalties.

Consumers should confirm whether the offer is truly interest-free or only during a promotional window and whether additional processing or convenience fees apply.

“Understanding repayment frequency—weekly, fortnightly, or monthly—is essential to avoid cash flow mismatches. Users must also verify if auto-debit authorisations are mandatory and ensure sufficient balance to avoid failed transactions and penalty charges,” says Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution.

According to Shetty, the consumers should check the credit limit offered. “Most BNPL providers offer credit in the range of Rs 2,000 to Rs 25,000 while a few offer up to Rs 60,000 or Rs 1 lakh. Some also offer incremental credit limits to regular, disciplined users. You must assess if the limit offered by your BNPL provider is enough to meet your spending requirements,” he says.

BNPL providers have different set of terms and conditions about late payments. You must get clarity on them before signing up. Most charge a non-cumulative penalty; others could charge interest on EMIs. Late payments could also adversely impact credit scores.

Also check the credibility of the service provider. There’s no dearth of reputed players entering the BNPL fray with cutting-edge safety mechanisms. But it still makes sense to check the credibility of the service provider.

“Users can check for the number of customers, media coverage, existing partnerships with reputed merchants, etc. to assess the credibility of a player. If your chosen service provider requires you to download a mobile application that requires permissions not proportional to the service being offered, you should rethink signing up,” advises Shetty.

Who Should Go For BNPL?

BNPL suits financially-disciplined consumers making essential, planned purchases, like necessary appliances or work equipment, who can comfortably afford installments within their existing budget, and have reliable income to meet scheduled payments. It benefits those without credit history seeking to build creditworthiness through timely repayments, and shoppers taking advantage of genuine interest-free periods for items they would purchase anyway.

Conversely, “BNPL should be avoided by individuals prone to impulsive buying, those already managing multiple debts or maxed-out credit cards, consumers using it for routine expenses like groceries or daily essentials, signaling income-expense mismatch, and people lacking stable income or financial cushion for emergencies. Those with poor money management habits, inability to track multiple payment schedules, or tendency toward emotional spending should steer clear as BNPL can quickly escalate into unmanageable debt cycles with cascading late fees and credit score damage,” says Abhishek Kumar, Founder at SahajMoney.

Thus, when handled wisely, BNPL is a convenient tool to optimize cash flow and access credit, but it can become a double-edged sword if used for unnecessary spending.