Loans

Got your dream holiday funded with BNPL or Personal Loans? Know the consequences

5 things borrowers should know before applying for student loans
Written by Publishing Team

For instant gratification and enjoyment, many people take out loans instead of putting off spending on non-essential goods and services.

It is usually said that loans should be taken only in order to acquire fixed assets or to enhance one’s earning capacity. However, people often take out loans in various forms – such as credit card loans, buy now and pay later (BNPL), personal loans, mortgage loans, etc. – to consume goods and services.

Personal loans are generally very expensive and if the receivables are not settled within the due date, the loan providers end up paying higher interest rates. But for immediate gratification and enjoyment, many people take loans rather than put off spending on unnecessary goods and services.

“The obvious advantage of BNPL and holiday personal loans is that you can have easy and immediate access to a higher vacation fund, allowing you to enjoy the vacation experience you desire without being cut back. Says Anshuman Narain, Vice President, CashBean (PCFinancial Services Pvt Ltd).

However, short-term happiness resulting from purchasing goods and utilizing services on credit may give you a long-term problem in making payments.

“Now while there is easy access to credit through these new channels, the real danger lies in the fact that if one becomes accustomed to BNPL and personal loan for regular high-value spending, the borrower’s home economy can have negative long-term consequences,” he said. Naren: “Vacation is one of the functions of a lifestyle, so one should not exaggerate financial resources for intangible gains in the short term.”

Comparing BNPL and personal loan options, Anil Binabala, CEO and co-founder of Vivifi India Finance said, “Going on holiday in times of Covid can be prohibitively expensive, even the cut-off unaffordable for many. However, you can choose the BNPL option or take advantage of Personal loan to ease the financial burden.

The process of obtaining a personal loan is quick and provides the opportunity for borrowers to borrow a small amount of money. It also comes with a lower interest rate compared to credit cards and can increase your credit score. Personal loans have downsides such as non-payment or late payments that may harm your credit score,” he added.

The BNPL service allows you to purchase items without paying for them all at once. When shopping online, you can usually get your BNPL approved within a few seconds upon checkout. However, don’t let BNPL tempt you to spend money that you don’t really have,” Benabala said.

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