As the older generation became complacent with using credit cards, the newer generation - or Gen z- found a more adapted way of fending for their shopping needs. Notably, the “buy now, pay later” services have many advantages that most young people enjoy. For instance, unlike credit cards, applying for a BNPL requires lesser effort and requirements. With that said, this payment scheme offers flexible finance at an early age. However, a little research and discipline might help with this settlement option. Mainly, because of its level of accessibility, teenagers and young adults might find themselves in unmanageable levels of debt. With that said, let us dive deeper into BNPL and how buying now and paying later works to avoid uncontrollable shopping sprees.
What is “Buy Now, Pay Later” or BNPL?
As the name suggests, this payment scheme allows a consumer to make a purchase, acquire the item immediately, and pay for it later over a series of installments. To illustrate further, your purchase will be divided equally, depending on your chosen plan. For instance, some payment methods come at a 3-month, 6-month, and 12-month period. You can have the amount automatically deducted from your debit card or other e-wallets, but a manual setting is also available where you decide when to pay. Moreover, the purchases usually come at a low-interest rate, giving younger generations more motive to use this payment scheme. However, the interest increases when a consumer fails to pay the bill before the due date.
And despite being available for years, the “buy now, pay later” hit the highest during the pandemic, when most people preferred to shop online. In addition, young consumers went into a frenzy when this payment option became available to some of the largest online shopping applications!
How does Buy Now, Pay Later work?
Conveniently, an online shopper no longer needs to exert extensive effort into applying for a BNPL payment option. And although the request process differs for each platform, they usually require basic steps.
Before checking out, you will be presented with an option to break up your total balance into smaller payments over a period of time. If interested, an application form will be presented on your screen. From there, you have to fill out the necessary information like your name, date of birth, email, phone number, and identification card. Some require more information, but those mentioned above are the basics. Additionally, a few of the BNPL providers might perform a soft credit check, but others do not require this at all. After doing all these steps, you will either be approved or denied in a short period. Usually, the credit limit varies depending on your inputted salary. But here in the Philippines, students can also enjoy this financing option on some applications with a lower limit. Indeed, BNPL opens the door to flexible finance from which Gen Z can benefit.
Gen Z and The Rise of BNPL
A tracking study from PYMNTS, a market research firm attuned to payment systems, showed that almost 60% of consumers prefer the “buy now, pay later option” over credit cards. Notably, this preference is specifically rampant among younger consumers. Many respondents to this survey gave out a number of reasons as to why they prefer BNPL. For instance, the service’s payments are easier to sustain than credit card repayments. Not only that, but young consumers love how there is a simple and fast approval process. But best of all, there is little to no interest if the designated amount is paid back on time!
Aside from that, many major online applications offer this type of payment scheme, including Shopee and Lazada. And since any Filipino can install these two online shopping platforms with a mobile phone, it is without a doubt that thousands might be using the “buy now, pay later” option. However, this payment scheme does not come without risks. Like credit card users, BNPL users can accumulate unsustainable debts if they are not careful. Furthermore, payment services like these are established to encourage people to buy more and borrow more. This will drive consumers to make several loans within a short period from multiple lenders without realizing they may be unable to pay them back on time or pay at all.
Other Financing Options
Before fixing your gaze on BNPL, exploring other financing options that could be more suited to your lifestyle is also advisable. Check out the possible alternatives below!
Credit Cards with 0% Interest
Applying for a 0% APR credit card is possible if you have an excellent credit score and a good credit history. This payment scheme charges zero interest during the card’s introductory period, ranging from 15 to 21 months. Moreover, each credit card payment plays a vital role in building your credit score. Credit companies will report your compliance with the costs to the bureaus, thus helping your score climb up.
Layaway
Another great alternative for “buy now, pay later” is layaway. However, the only difference is with this option; you will only get the item after paying the total amount. On a lighter note, this scheme will allow consumers to deposit and then make small payments until the item is fully paid for. Indeed, this is an excellent option if you do not wish to fall into debt or pay excessive interest rates due to failure to comply.
Small Personal Loan
Getting a small personal loan might be a wise choice if you want a longer repayment period. This alternative is available all over the credit spectrum, and your credit history will also play an essential role in this scheme. And even though this kind of loan comes with interest, the bright side is your monthly payment will not hurt your pockets.
With everything mentioned, BNPL should be used with extreme caution, despite its convenience and accessibility. Consumers must assess their capacity to pay on time and monitor their discipline with every purchase under the “buy now, pay later” payment scheme. Otherwise, staying knowledgeable about other financing options more suited to your situation is also good. If you wish to know more about credit, please click here to browse more blogs from Vista Residences!
For more information on Vista Residences, email info@vistaresidences.com.ph, follow @VistaResidencesOfficial on Facebook, Twitter, Instagram, and YouTube, or call the Marketing Office at 0999 886 4262 / 0917 582 5167.
