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BNPL or personal loan: What’s the best pick for your pocket?

Thinking about BNPL or a personal loan but can't decide? We break it down for you so you know what's best for your next big buy.

BNPL or personal loan

BNPL and personal loans have emerged as popular financing options, each catering to distinct needs and preferences. BNPL, initially launched for online shopping, has expanded its reach, offering flexible, interest-free payment plans for immediate purchases. 

On the other hand, personal loans provide a lump sum with fixed interest rates, suitable for larger financial commitments. With India’s BNPL market projected to grow at a CAGR of 10% in the coming period and personal loans remaining a dependable solution for comprehensive financial needs. Hence understanding the benefits and differences between these options is important. 

This guide aims to explain BNPL and personal loans, helping you make informed financial decisions.

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BNPL- What does it mean?

BNPL’s full form is Buy Now, Pay Later. It is a financial service that allows you to purchase goods and services immediately and pay for them over time. This can be through instalments or later on, typically without any interest. It’s a convenient option for consumers, particularly young ones or those with limited credit history, offering an easy way to manage purchases online.

But following the repayment plan is really important. Missing payments can result in late fees and potentially harm your credit score. Despite this, BNPL offers a flexible and accessible way to spread out the cost of purchases, available on a wide array of platforms, including e-commerce, travel, and education services.

Also read: Credit history: What is it and why it matters?

How does BNPL work?

  1. Account creation: You must register for an account with a BNPL provider in order to begin. In order to proceed, you must enter some basic personal information about yourself, such as your name, address, and birthdate. It’s straightforward and quick, ensuring you can move on to shopping in no time.
  2. Soft credit check: Unlike traditional loans or credit card applications, BNPL providers perform a soft credit check. This is to make sure you have the resources to repay and to confirm your financial stability. The good news is this type of credit check is less invasive and won’t affect your credit score.
  3. Shopping and checkout: Once your account is set up and approved, you can shop with merchants that accept BNPL as a payment option. You will be able to select BNPL for your purchase during the checkout process. Typically, you will be required to pay a down payment of 20–25% of the total cost up front; the remaining amount will be reimbursed by your BNPL plan.
  4. Repayment: After your purchase, you’re responsible for repaying the amount financed by the BNPL provider in instalments. You know exactly what you owe and when because the terms of repayment are laid out clearly from the beginning.

BNPL benefits

  • Accessibility for all: One of the standout features of BNPL is its inclusivity. It provides prospects for a diverse range of customers, irrespective of their financial status. 
  • Instant credit availability: With BNPL, customers enjoy the benefit of instant credit. This eliminates the waiting time for loan approvals or the need to have cash upfront, enabling immediate purchases. 
  • Enhanced affordability: BNPL breaks down the total cost of a purchase into smaller, manageable instalments. This effectively makes products more affordable for customers who may hesitate to make large purchases.
  • Convenience and ease: The checkout process with BNPL is designed for convenience, offering a seamless transaction without the complexities of traditional loan applications. Customers can quickly choose a payment plan and complete their purchase, making the shopping experience smoother and more enjoyable.
  • Low to no interest: Most BNPL plans are interest-free if repayments are made on time. For consumers, this means the cost of borrowing is reduced, making BNPL an economical choice for short-term financing.
  • Quick approval process: The approval process for BNPL is fast, often happening in real-time during the checkout. This immediacy ensures that customers can complete their purchases without delay, enhancing the overall shopping experience.
  • Benefits to merchants: Merchants offering BNPL can see increased sales and lower cart abandonment rates. It attracts customers who may be hesitant to make large purchases upfront, thereby widening the potential market and boosting revenue.

Personal loan and its benefits

A personal loan is a versatile financial instrument that enables people to borrow money from any type of lending institution, including banks. Here are some of the advantages:

  • Flexible use of funds: Personal loans offer the ultimate flexibility, allowing you to use the money for any personal need, whether it’s for home renovation, medical emergencies, or consolidating debt.
  • No collateral required: Since these loans are usually unsecured, you are not required to put up assets as security. This aspect makes personal loans appealing to those who do not wish to risk their assets.
  • Predictable monthly payments: With fixed interest rates, personal loans ensure your monthly payments remain constant throughout the loan term, aiding in better financial planning and budgeting.
  • Fixed terms for repayment: Personal loans come with defined repayment periods, usually ranging from one to five years, providing a clear timeline for paying off the loan.

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BNPL vs Personal loan: Which one to pick?

Choosing between BNPL vs personal loan depends on your financial needs, the amount required, repayment capability, and how quickly you need the funds. While each alternative has benefits, their functions are distinct. To help you decide which could work better for you, consider the following comparison:

FeatureBNPLPersonal Loan
PurposeIdeal for smaller, immediate purchases. Often used for online shopping.Suitable for larger financial needs such as debt consolidation, home renovation, or significant personal expenses.
Loan amountCredit limits are usually up to ₹60,000, catering to smaller purchases.Can provide loans in the range of a few thousand to several lakhs, based on the borrower’s eligibility.
Repayment tenureShort-term, ranging from 6 to 12 weeks.Longer tenures, typically several years, providing more time to repay.
Access to fundsDirectly pays the merchant; the consumer does not receive the funds.The borrower has choice in how they use the loan amount because it is credited to their bank account.
Approval processQuick and digital, with minimal documentation. Often, at the time of sale, approval is granted instantly.May take longer to approve due to the need for more thorough documentation and credit checks.
Interest ratesUsually interest-free if repaid within the agreed timeframe.Interest rates apply, varying based on the lender and the borrower’s credit profile.
Impact on credit scoreMissed payments may affect your credit score, but overall impact might be less direct than with personal loans.Timely or missed payments have a direct impact on your credit score, reflecting in your credit history.


Your financial health, immediate needs, and repayment capacity should, therefore, influence your decision between BNPL and a personal loan. While BNPL suits quick purchases and short-term financial strategies, personal loans suit long-term financial planning and are better suited for bigger expenses.

Whichever option you choose, maintaining timely repayments is important to avoid any negative impact on your credit score. You can better manage your finances and achieve your financial objectives by making decisions that are well-informed and based on an in-depth understanding of each available alternative.

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StockGro Team

StockGro is India’s first and largest ‘Social Investment’ platform aimed at helping you master the art of “Trading & Investment”. Trade, Invest and get rewarded to Learn everything about ‘Investments’ the fun-filled way.

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