Helping New Borrowers With Credit Score And Credit Access

The Buy Now Pay Later (BNPL) market skyrocketed during the later months of 2020 and is set to reach US$33.6 billion by 2027. In India, BNPL has a massive growth potential due to the growing number of internet users and the significant gap in consumer lending. 

This interest-free payment option allows customers to make purchases without paying for them upfront. Many BNPL providers do not require buyers to go through a hard credit score check, making it easier to access funds. 

Buy Now Pay Later schemes are also available for businesses allowing retailers to purchase on credit and repay in instalments. KredX offers the Buy Now Pay Later solution to its clients, allowing them to get instant payments while their buyers can access easy financing. 

Now let us discuss how to access this service and its effects on credit scores.

What Is BNPL And How Does It Work?

Buy Now Pay Later allows shoppers to buy products without making any upfront payment and repay the amount later in three to four instalments with no interest attached. The interest-free period usually ranges from 15 to 45 days, while the credit limit is usually Rs. 500 to Rs. 30,000 and may go up to a lakh depending on the provider. 

The BNPL facility works well for young and new-to-credit buyers, who are often cash strapped and do not have access to credit cards. In addition, the applications are easy, as the provider typically does not need to conduct a hard credit check for approval. 

First-time buyers have to complete KYC formalities on the lender’s platform. They will then settle the buyer’s bills directly with the merchant. After that, the borrower has to repay the credit within a stipulated period, often in three or more instalments. 

How Can One Avail BNPL Services In India?

The Buy Now Pay Later facility is available for a wide range of options, from food delivery and travel booking to purchasing gadgets and apparel. Quite a few online merchants and fintech companies offer this service in India. This includes:

• E-commerce platforms like Amazon and Flipkart.
• Banks such as HDFC Bank and ICICI Bank.
• App-based platforms like PayTM, PhonePe, Simpl, Ola Money, LazyPay, ZestMoney, MoneyTap, CASHe, and many more.
• Fintech companies like KredX.

Lenders offer easy-to-meet eligibility criteria for BNPL compared to other financial products. Buyers can sign up for this facility at the checkout of an online marketplace platform or a shop. 

Businesses too can opt for BNPL services for regular transactions for instant credit and seamless payment. To sign up for BNPL at KredX, follow the given steps:

Step 1: Go to the Buy Now Pay Later section and fill out the provided form.

Step 2: Fill out the required data for quick API integration with the platform.

Step 3: After successful integration, one will be able to see BNPL as a payment mode at checkout. 

Step 4: One can offer this credit facility to their buyers to increase sales.

How Can Buy Now Pay Later Affect One’s Credit Score?

If one fails to repay the amount within the predefined period, the lender will charge interest on it. Different providers have their own terms regarding late payments. Some require extra settlement fees, while others charge late payment penalties. 

Most BNPL providers, especially ones offered by financial institutions, report the buyer’s repayment track record directly to credit bureaus. For those who use the Buy Now Pay Later sensibly, this will have a positive effect. 

As regular repayments reflect the borrower’s responsibility, BNPL would improve their credit scores. BNPL can therefore be used as a tool to quickly increase one’s credit score, provided that one makes regular repayments. This would also increase their spending limits on such credit.

However, if these borrowers keep delaying their payments, it will significantly lower their credit scores. Missed payments can reflect on one’s credit score for a very long time. This will increase the price of loans taken or even prompt lenders to reject loan applications in the future.

Things To Keep In Mind When Availing BNPL

Here are some tips people can follow to make the best of the Buy Now Pay Later services:

• While most BNPL players do not rely on credit scores, they rely on information like past purchase history, repayment behaviour etc. One should make purchases within their spending limit and not have arrears with the merchant to get the maximum credit. 
• Though BNPL lenders offer small credit limits in the beginning, one can regularly use the services to get larger ticket credit with time.
• Make sure not to default on the repayment as it would bring down the credit score and raise the cost of future credit.
• Read the credit facility terms to check the interest and late fee charges
• Avoid taking credit that one cannot afford to repay.

Bottom Line

Buy Now Pay Later offers seamless and instant credit at no interest charges for a specific time frame. Depending on one’s financial behaviour, this can help build a strong credit profile or lower it. People should always consider their repayment capacity before applying for it.