The pay later option or, in better terms, the buy now pay later option is an improved version of financing in retail.
The buy now pay later option for sales is a short-term lending option for the consumers where the consumer can make any purchase at any retail point without paying off the entire amount at once.
How does it work?
In some pay later options, the consumer has to pay a part of the cost of the product that he is purchasing, while many other pay later options do not have any such requirements.
In case the consumer pays a part of the price during purchase, the rest of the amount is paid off in monthly installments or during billing cycles, which in typical cases is in every 14 days.
As these are just another type of loan, the repayment tenure can be anything between one in 14 days, once in a month, or any other payment schedule.
How is buy now pay later different from installment purchases?
The buy now pay later options are more centred around closing the sales rather than the repayment ability of the customer, which is the case in the case of conventional installments.
Another point of difference between buy now pay later schemes and installment purchase is that no hard credit check is performed for the pay later schemes.
However, such leniency in credit checking is appealing for consumers with low credit scores who are otherwise ineligible to avail of any finance or borrowing options.
Whereas in the case of purchases done on EMIs a proper credit check is performed before financing the purchase for the consumer.
Which social groups are more inclined to use the pay later options?
Buy now pay later is a convenient payment option that is nowadays available with almost all major e-commerce sites.
The option is most appealing to the younger generation, to people with a weak credit score, also among the individuals who belong to middle and low-income groups and the tech-savvy chunk of the general populace.
Lastly, it can be said that the particular payment option is more popular among those who are regular in online shopping, compared to the ones who prefer in-shop shopping over the digital mode.
Benefits of the buy now pay later option:
The buy now pay later option is beneficial for the consumers in the fact that it allows them to get hold of products that are not yet fully paid for, which in turn can boost the sales for the particular industry.
Such a boost in sales can improve trade and commerce in general.
Moreover, the entire process of online transactions is made quite simplified with the help of the scheme as they offer a simplified check-out process, instant approval of the purchase amount, zero interest on the loan amount, and an easy pre-determined installment plan.
Risks associated with pay later options:
The buy now pay later option is just another form of a loan. Hence, any delay in the payment of the installment or missed payment can impose a penalty on the person and even negatively impact his credit score.
Moreover, since no strict credit check is performed and approvals are almost instant, consumers can even pile up debts while purchasing something impulsively, even when, in reality, they may lack the fund required for paying off the debt.