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Buy Now Pay Later vs Personal Loan: Know which is better

Point-of-sale instalment loans known as "buy now, pay later" agreements let customers make purchases and pay for them later. It is the latest trend among millennials and GenZ.

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Buy Now, Pay Later (BNPL) is a type of short-term financing that enables customers to make purchases and pay for them later, frequently interest-free. BNPL agreements, often known as "point of sale instalment loans," are quickly gaining popularity as a form of payment, particularly for online purchases. 

Prior to a few years ago, our only options for unsecured credit products were personal loans and credit cards. Merchants and fintech companies now offer loans that are Buy Now Pay Later (BNPL). With just a few taps on their phone displays, the appropriate borrowers can access these possibilities. Fill out your personal information, finish the KYC process, and receive loan approval – sometimes within minutes.

(Also Read: Financial planning: Do’s and don'ts of managing your finances)

How does BNPL work?
The sole practical difference among BNPL service providers is in the terms and conditions. This is how it typically goes:

  • From a participating retailer, make a purchase.
  • The "Buy now, pay later" option should be used.
  • Put a little portion of the total purchase price down.
  • A series of interest-free EMIs will be used to deduct the outstanding amount.

What is the difference between BNPL and Personal Loan?

  • BNPL offers a maximum loan of up to Rs 1 lakh whereas in Personal Loan you can get a maximum loan of Rs 25 lakh. 
  • BNPL offers only secured loans while Personal Loans offer both secured and unsecured. 
  • BNPL has become a popular affordable payment option due to its low documentation requirements and broad eligibility.
  • A personal loan is an excellent choice for covering significant or unexpected expenses since there is no restriction on end use. 
  • The majority of lenders who offer BNPL facilities offer free EMI repayment plans.
  • A personal loan has a set interest rate. However, when it comes to BNPL, this is very different.
  • A personal loan normally has a length of 12 to 84 months, but a BNPL has a shorter term of 15 days to 3 months. 
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