The Benefits And Drawbacks Of Buy-Now-Pay-Later Plans

Many individuals are familiar with the concept of “buy now, pay later.” This concept applies to any purchases that people make today. In action, people buy the things needed with an initial, albeit smaller cost, with the agreement to pay the rest at a later date as staggered payments. Such a method of purchase can be incredibly tempting to many individuals, especially those that are short on money. 

Unfortunately, while BNPL is made to help buyers make big purchases even if there is not enough money, individuals who aren’t good at managing money can quickly be buried deep in debt.

That said, let’s delve into the BNPL concept, talking about the benefits and drawbacks it has:

The Benefits Of “Buy Now, Pay Later”

1. Makes Expensive Products More Accessible

This is an obvious benefit, but it is important to state it. BNPL levels the playing field for many individuals, and for those looking to make a big purchase but cannot afford the entire purchasing cost in one go, BNPL is a godsend. That’s because BNPL plans divide payments for a product. This makes it so that an individual pays monthly as if a loan is taken out. Albeit, instead of a loan, one’s own money is used to pay.

2. Payments Are Interest-Free

Interest is one that stops many people from using things such as credit cards to make purchases. Sure, it makes expensive products “affordable,” but interests make the products more expensive in the end. Many BNPL plans avoid any interest, giving individuals the chance to buy anything while giving more time to pay it off.

3. Can Build Credit

Many financial institutions that offer BNPL plans report such payment history to credit bureaus. This makes it a great way to build credit, and having a good credit score simply means more opportunities for great loan deals down the road.

The Drawbacks Of “Buy Now, Pay Later”

1. The Temptation Of Overbuying

With the prospect of being able to purchase different expensive things in a more affordable way, individuals who have little to no self-control tend to overspend and overbuy. After all, one can easily end up buying something thanks to staggered payments that make products affordable. Unfortunately, this can quickly spiral out of control, leaving the individual deep in debt that can be incredibly challenging to get out of.

2. Some Plans Have Interest And Fees

While some BNPL plans have no interests or fees, some still do. In fact, some BNPL interest rates can shoot up as high as 30%. That’s an incredibly scary thought, and for individuals that have trouble keeping up with payments, the added interest rate isn’t going to make anything easier.

Conclusion

Overall, BNPL plans are great to help individuals afford things that are out of reach. However, there are still risks to take into account, such as the temptation to overspend. As such, one must always be cautious about opting for a BNPL plan. Any lack of self-control can quickly cause one’s debt to spiral out of control, and so, to make the most out of the benefits BNPL plans have to offer, one must make only sound financial decisions.

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