There are 2 options to make payments for your transactions or purchases - Save Now Pay Later and Buy Now Pay Later.
Let us now see how each of them works and their benefits.
How Does SNPL Work?
The Save Now Pay Later Option involves planning beforehand for your purchases. You do the savings initially and then spend them on your buys. For instance, say you plan on making a purchase for Rs. 1,00000. You start saving Rs. 5000 every month to create the required corpus. You can save for 20 months till you end up saving Rs. 100,000 and then do the purchase.
Benefits of Save Now Pay Later
Buying The Goods You Aspire Without Debt/Loans:
SNPL is suitable for someone who wants to use something other than a consumer loan, BNPL, or credit card to purchase a product. SNPL does not charge any interest on loans to its users. However, others may incur not only the interest but also the processing fees. Not paying the debt on time will affect your credit score negatively and may even lead to a steep debt trap.
SNPL Gives Assured Brand Cashback/Discounts:
You may not be able to get cashback or discounts when you buy a product using regular channels. This is because it depends upon many factors like sales in progress, a specific bank’s debit or credit card, and other offers. However, if you have opted for SNPL, the merchant will agree to pre-fixed cashback. Using SNPL platforms, you can buy from any brand that you like by using the predetermined savings allocated by SNPL.
SNPL Helps In Giving A Saving Perspective:
SNPL works on the principle of reverse SIP (systematic investment plan). This estimates how much money one has to start saving today to meet future goals. Putting money into a bank account, FD, RD, or mutual fund to accumulate the money required for future use is a form of SNPL.
How Does BNPL Work?
This payment option allows you to buy anything that you desire on credit and then pay later. Credit cards and BNPL modes of payment enable credit transactions. Each of the transactions gets added to a bill, which you can settle later.
Benefits of Buy Now Pay Later
- You don’t have to wait to make your purchases.
- You can buy instantly and then pay later on
- It is very helpful in a cash crisis situation.
- When you don’t have enough savings and you land in an emergency situation, then you can use BNPL as a source of money.
- BNPL platforms also earn you attractive rewards, discounts, and deals on your spends. So, you get to save with every transaction.
- If you do the bill payment and clear your dues on time, you don't incur any additional interest charges.
SNPL Versus BNPL
Debt Trap and Credit Score:
- In the BNPL model, credit lines are offered for instant purchases. If you don’t repay on time, it can result in you falling into a debt trap. This will also bring down your credit score and does not help you save anything for the bad days.
- With SNPL, you can make high-value purchases without falling into a debt trap. This does not require or affect the customer’s credit score and liabilities.
Non Payment of Dues results in Extra Interest Payments
- With BNPL, not paying the dues on time results in additional interest payments. This in turn will lead to steeper debt and hampering of credit score
- With SNPL, You don’t have to take credit that entails additional interest payments on non-payment of dues. Thus, you can be debt free and maintain a good credit score.
- BNPL may lead to overspending since you can just get loans instantly and lenders are happy to give out these loans. You may thus end up creating such huge bills which you will find really difficult to pay.
- With SNPL, this issue is not there, since you are going to use only your savings to make the purchase.
Small Ticket Spend Segments:
- SNPL is unlikely to work in the small ticket spending segment like grocery shopping etc. Nobody would actually save up for groceries and buy them.
- BNPL on the other hand works very well for small ticket purchases. You can get small instant loans for your immediate needs and pay them later.
Cash Crunch Situations:
- SNPL is not very suitable for cash crunch situations. Suppose you want to buy a lot of medicines which cost quite a lot. And you don’t have enough corpus left in your SNPL. Then, you can get an instant loan using BNPL and buy these medicines. Thus, BNPL comes in highly handy during a cash crunch.
Rewards, Discounts, and Deals on Your Spending:
- BNPL gives attractive rewards, discounts, and deals on your spending.
- With SNPL, the gratification is delayed, and you have to wait to make the purchase. But with BNPL, the gratification is instant.
Which One Is Better For You?
Both BNPL and SNPL have their set of pros and cons. So, you should choose the apt one according to your requirements and suitability. When you have time, saving to create a fund is suitable. It can also instil the habit of saving and make you a responsible spender. On the other hand, buying on credit comes in extremely handy when you are facing a financial crunch.
FAQS of Save Now, Pay Later or Buy Now, Pay Later
1:Is it safe to use Buy Now Pay Later?
Buy Now Pay Later can cause a dip in your credit score if you fail to make the payment.
2:What credit score is required for a BNPL plan?
There is no set credit score required to sign up for BNPL services. Some services won’t even check your credit score or reports while others might just conduct a soft credit check to ascertain your creditworthiness.