December 2, 2021 03:01 PM
The first thing that comes to mind when it comes to finances are personal loans and credit cards. These can be used to get an easy loan without any collateral . Especially credit card. The craze is high as it offers interest free loan for a fixed period of time. The BNPL (Buy Now .. Pay Later) approach provides similar services. It’s an alternative to credit cards.
You can buy the items you want in advance and pay the money by the due date. But for a credit card, there is a difference between the later policies. However, just like a credit card, if you do not pay the arrears on time, you will have to pay higher interest rates.
A Personal Loan is a loan that is taken for personal use. These loans are taken to fulfill the requirements of objectives like purchase of property, academic pursuits, medical expenses, etc.
Different banks offer Personal Loans at different rates of Interest. The rate of interest ranges from 11-24% per annum.
A personal loan can be availed from any bank in India and the borrower is free to choose from a number of banks available in their locality.
The borrower can get a personal loan with an interest rate as low as 11% per annum and so there really isn’t anything to worry about when it comes to taking a Personal Loan.
Buy Now Pay Later: The number of buyers under the Buy Now Pay Later (BNPL) scheme is on the rise right now. Items can be purchased in easy installments under this method. However, it is not an end-to-end credit product available for all types of goods and services.
This policy can only be used for eligible purchases. Easy to use. Also, get a loan with EMI facility with zero interest.
The policy is mainly available on e-commerce, food-ordering, ride-sharing, travel booking, online grocery and service websites. With proper planning, it can be used extensively for wedding shopping and vacations.
Credit Cards: Credit cards serve as intermediaries for personal loans and BNPL. All types of payments can be made as long as you have your credit limit. It has an interest free period so it is advisable to make payments on time.
If the amount to be paid is higher, the minimum amount can be paid and the remaining outstanding amount can be converted into EMIs for a period of 3 to 24 months. However, the amount of interest will depend on the card issuer, the amount to be paid and other factors.
However it is better to make timely payments or it will become expensive due to high interest rate. Generally, the annual interest rate on a credit card can be as high as 36%.
What is the difference between credit card and Buy Now Pay Later?
Credit cards carry hidden charges.
You need to have a good credit history to get a credit card.
Credit card can be used almost everywhere.
There will be a specific interest-free maturity.
Can be easily approved.
Possibility to pay a minimum amount. The remaining arrears can be transferred to subsequent months.
Get cashback on purchases, reward points, airmail.
Buy Now Pay Later:
BNPL comes in transparent, low price.
Credit history is incorrect.
BNPL services / facility are provided only by selected e-retailers and fintech companies.
The interest free period is 15 to 45 days.
Pay the fixed EMI by the due date.
Benefits such as cashback on purchases, reward points, airmail are not available.
Which way is better to take a loan?
Funds can be raised for needs and entertainment in all three modes. However, these should be selected based on your need, cost, benefit, especially your repayment capacity. All three face hefty fines for late or non-payment.
Also, this effect has an effect on the credit score as well. So plan ahead to repay the loan. Then apply for a loan. Also it is important to invest for long term goals. It is important to plan ahead so that these investments are not affected when repaying the loan.
Credit card use or BNPL, personal loan is not suitable for unnecessary purchases. It will hurt your finances.