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Benefits and Difference Between BNPL and Personal Loan

Over the decades, there has been a sea change in the way people shop. Markets have become customer-centric, and manufacturers and sellers try hard to cater to a diverse mix of consumers all across the globe. 

Nowadays, customers have choices in almost every segment, including consumer goods and credit facilities. On top of that, customers have different options to finance their purchases. The two most common financing options customers use nowadays are BNPL (Buy Now, Pay Later) and Personal Loans in India. You can check here: https://www.fullertonindia.com/knowledge-center/personal-loan-vs-credit-card-vs-bnpl.aspx

A Personal loan is the most preferred and trusted financing option, BNPL is fast gaining popularity, especially among the millennials and GenZ. Knowing these easy financing options is crucial to make the best decision when one needs funds. 

What is Buy Now Pay Later?

BNPL is a type of micro-loan that a buyer can use to make small purchases instantly at the point of sale. BNPL can be understood as an unsecured loan that the borrower has to pay within a predetermined repayment period. The repayment cycle of BNPL is usually between 14 and 90 days. One can repay these small-ticket loans in easy EMIs (Equated Monthly Instalments) that may be interest-free. 

Pros of Buy Now Pay Later

Most e-commerce vendors and online shopping sites use BNPL to attract customers. 

  • BNPL is useful for customers willing to make small purchases without an upfront payment. Many customers use this facility since their financial background does not matter much. 
  • BNPL provides an instant credit facility to the customer. They do not have to wait to save enough funds to shop. They can use the BNPL facility to buy things immediately and repay the amount in easy, time-bound EMIs. 
  • BNPL makes goods and services more affordable for customers who may not have the funds to buy those things otherwise. 

What is a Personal Loan?

A Personal loan is an unsecured loan that people use to finance multiple big-ticket expenses and meet various immediate financial needs. The scope of a Personal loan is way beyond general purchases. You can use a Personal loan amount for medical emergencies, repair work in the house, college fees, and other personal needs. Personal loan requirements are easy to meet, allowing more customers to avail of the facility. 

Pros of Personal Loans

Personal loans are a boon for people needing urgent cash. 

  • These are unsecured loans, so they do not require pledging an asset with the lender as security. Lenders sanction a Personal loan to a borrower based on their repayment capacity and do not ask for collateral. 
  • The absence of a collateral requirement reduces the paperwork to sanction a Personal loan. These loans require identity, address and income proof. 
  • The repayment term of a Personal loan is flexible and allows the borrower to repay the loan anytime between 12 to 60 months. 

Difference Between BNPL and Personal Loans

BNPL

A micro-loan solution for small purchases.

Personal Loans

A big-ticket loan that caters to emergency purposes, planned and unplanned expenses, and big-ticket purchases.

Customers can take BNPL credit of up to ₹1 Lakh. Individuals can avail of a personal loan of up to ₹25 Lakh.
Suitable only for certain kinds of purchases. Suitable for a variety of financial obligations.
Short repayment tenure between 14 to 90 days. Flexible repayment tenures of 12 to 60 months.
Interest-free EMI. EMIs comprise principal and interest components.
Credit facilities available through e-commerce, shopping, and other service websites. Financial institutions offer this credit facility.
Interest-free loan. Interest rate applicable on the loan.
Customers’ buying patterns and payment history decide their creditworthiness. Customers’ credit scores and repayment capacity decide their creditworthiness.
The lender pays the amount directly to the merchant on the customer’s behalf. The loan amount gets deposited in the customer’s bank account
Restricted usage. No end-usage restrictions.

 

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With this detailed information on BNPL and Personal loans, you can make an informed decision when choosing the best financing option.

 

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