Is Buy Now Pay Later A Type Of Consumer Loan?

Consumer loans are advances that lending institutions offer to finance different purchases. These loans can be secured (backed by assets) or unsecured (not backed by assets). Mortgage loans, auto loans, personal loans, student loans or even credit cards qualify as consumer loans.  During the pandemic, the consumer lending sector suddenly saw a rise when Buy Now Pay Later (BNPL) was introduced. The pandemic forced more people to adopt an online mode of shopping and helped grow the e-commerce market. Those who are wondering if Buy Now Pay Later is a consumer loan must know that BNPL usually does not charge interest for purchasing and does not require a minimum monthly payment.  This is where it differs from credit cards, a form of consumer loan. This piece focuses on explaining BNPL consumer loans and their distinctive features.

Buy Now Pay Later- A Brief Overview

Buy Now Pay Later is a credit facility that allows consumers to buy products without any upfront payment and pay later at a future date.  This credit facility benefits both consumers and merchants as both parties receive products and money respectively without delay. Wondering how?  This is possible as the BNPL provider acts as an intermediary between these two parties that offers money to merchants on behalf of customers and enables customers to purchase products.  Remember, here; consumers can mean both the general public and business buyer. It means BNPL is operational in both B2C and B2B sectors.  BNPL is a type of consumer loan since it helps consumers (including business buyers) purchase products. However, specific characteristics set this credit facility apart from other available forms of consumer loans.  

Features of Buy Now Pay Later

Here is a list of features of the BNPL credit facility,
  • No Collateral Required
To avail BNPL credit facility, business buyers need not pledge any collateral. BNPL is typically a credit facility available at the point of sale. BNPL is also known as a Point-of-Sale instalment. 
  • Documentation
The documentation of Buy Now Pay Later is simple. First-time buyers need to complete KYC formalities on the BNPL provider’s platform. The documentation of the BNPL credit facility is the simplest because the documentation requirement is not extensive as in other consumer loans. 
  • No Upfront Payment
While purchasing products through Buy Now Pay Later, consumers or business buyers need not make any upfront payment. Consumers can pay for the purchased products at a later date and choose to break the payment into several instalments. This characteristic of the BNPL credit facility highly matches with credit cards and personal loans, which are forms of consumer loan.     
  • Interest Charges
BNPL credit facility allows consumers or business buyers to break their purchase amount into several instalments. This credit facility usually does not charge interest for paying in instalments. It is here BNPL consumer loans differ from consumer loans such as credit cards. All consumer loans come with interest charges. 

Benefits of Buy Now Pay Later

Below is a list of benefits that Buy Now Credit Facility offers.
  • Convenience: One of the biggest advantages of BNPL is convenience. By simply downloading an app, buyers can avail this credit facility. Further, by offering this payment option at the point-of-sale, merchants can easily attract more customers, increase sales and manage stocks.
  • Interest-free Window: Another advantage buyers can enjoy the interest-free window. For instalment payments, business persons need not pay any interest charges. 
  • Relaxed Eligibility Criteria: Any business buyer or consumer can purchase through Buy Now Pay Later. Buyers are required to complete simple KYC formalities to utilise the benefits.
Business buyers involved in business and willing to enjoy the benefits of Buy Now Pay Later can rely on KredX, a renowned BNPL provider. This online platform offers brands and enterprises instant money for the products sold while business buyers get their products instantly.   

Bottom Line

Consumer loans and interest charges are inseparable, and one cannot think of taking a consumer loan without paying interest charges. However, BNPL changed the concept wholly and gave consumers an interest-free shopping window. For that matter, BNPL consumer loan can certainly qualify as a consumer loan and storm the consumer lending market with its unique and advantageous features.