It’s easy to get a loan or a new credit card when you are young, however, after retirement, it gets more and more difficult to get a new credit card or loan. So, senior citizens have to plan their spending, otherwise, they may get into a financial crunch. However, if the seniors plan to spend money on shopping, one more option is available in the market-“Buy Now Pay Later (BNPL)”. As seniors have to depend on their retirement corpus to meet their financial needs, they can’t make a wrong borrowing choice and jeopardise their retirement life. So, they must understand about the BNPL before they use this facility.

Also Read: NPS Pension Scheme: How To Apply And What Documents You Will Need

What Is BNPL?

BNPL is a credit facility offered for the short term to people who need money to buy an associated product or through a specified platform. After purchasing a product under BNPL credit, the buyer can repay the lender through interest-free EMIs within a specified period. The processing time in a BNPL facility is quite faster compared to a personal loan or a credit card loan. BNPL facility can be availed for online as well as offline store purchases.

Things You Should Know Before Using The BNPL Facility

Are BNPL EMIs an interest-free product? Not really! In a BNPL facility, usually, the vendor and the financer have a tie-up under which the product on which the BNPL facility is offered are sold at a price that includes the interest applicable on it. So, you may find a difference in the price of product that comes with the BNPL facility and without the BNPL facility. Still, it can be a good deal if the extra money that you have to pay for a product with a BNPL facility is lower than the interest and processing fee that you have to pay for buying the same product through a personal or credit card loan.

There can be a restriction on the maximum age for availing the BNPL facility, so check the eligibility criteria before you accept the offer. Similar to other unsecured loans, the BNPL facility is also reported to the credit bureau and if you delay EMIs or make a repayment default then it can impact your credit score negatively and you have to pay hefty penalties such as late payment fees and higher interest rate. Terms and conditions applicable on the BNPL facility may vary from vendor to vendor as well as depending on the type of the product for which you want to avail it, so read the fine print before you apply for this facility.

Also Read: Personal Loan Repayment: 5 Efficient Ways To Service Your Debt

Should Seniors Use The BNPL Facility?

Seniors should live and spend within their financial capacity. Usually, BNPL facilities are offered for shopping purposes, travel and tour bookings, etc. and these things are often non-essential, so, borrowing can be avoided by seniors. However, if the senior person requires a credit facility for essential purposes like buying medicine, hospitalization, paying insurance premiums, electricity bill payment, telephone bill payment, etc. and there is a financial crunch, they can use the BNPL facility if available to them.

The author is an independent financial journalist.