How “Buy Now, Pay Later” Affects Your Credit Score? Key things to know


Buy Now, Pay Later (BNPL) has become an emerging online payment form over the last 2-3 years. While these plans offer instant, no-cost financing, it’s important to understand what they mean for your credit score.

To begin with, credit rating is a key benchmark for understanding an individual’s lending credibility with financial institutions in India. Credit score is a number measured between 300 and 900 and is calculated by credit reporting companies in India.
Recently, BNPL has particularly found favor with a portion of people who do not have a strong credit history or who are not eligible for a credit card and therefore find it difficult to avail traditional loans and cards. credit at affordable rates.

Indeed, BNPL can also be offered to people with low credit ratings, said Nitin Mathur, CEO of Tavaga Advisory Services, in an interview with CNBC-TV18.

“Additionally, BNPL has captured the attention of regulators and the credit industry and is expected to soon play a leading role in consumer credit ratings,” he said.

BNPL focuses more on the underfunded section of the loan market and therefore could be a good way for a person to start building their credit profile.

“Traditional loans can require a relatively complicated and more paper-heavy process with low chances of approval for someone with no or low credit score, which BNPL does not,” said Anshuman Narain, Vice President of CashBean.

However, it is important to check here that before availing BNPL, one must understand the underlying risks of this option.

BNPL is after all a personal loan and will need to be repaid. Depending on the type of plan individuals choose, they may be charged fees and interest if they fail to make payments on time. Additionally, there is an inherent risk of getting carried away and spending too much through BNPL than they can afford, which can negatively impact credit rating, Mathur said. CNBC-TV18.

Thus, before availing loans through BNPL, individuals should ensure that they are not putting their credit rating at risk.

Warning:

The opinions and investment advice expressed by the investment experts on CNBCTV18.com are their own and not those of the website or its management. CNBCTV18.com advises users to check with certified experts before making any investment decisions.

First post: STI

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