Use 'pay later' loan facility only if interest rate is attractive

However, be careful to avoid over-leveraging

Amazon India disbursed over Rs 600 crore of credit to its customers through the ‘Pay Later’ offering, on the first day of its Great Indian Festival sale, said media reports. Besides e-commerce platforms like Amazon and Flipkart, even fintechs and banks offer this facility.

This loan facility offers access and convenience. Says Mahendra Nerurkar, chief executive officer, Amazon Pay India: “It expands customers’ access to credit. It also allows them to experience a convenient option for making payments and to manage their monthly spend better.” 

The product is finding takers among younger buyers. Says Gaurav Hinduja, co-founder and managing director, Capital Float, a leading ‘buy now, pay later’ provider: “The majority of our customers are millennials and young professionals in the 25-40 age group looking for mobile-first, digital financial products. There is also strong interest from customers in tier-II and tier-III towns.”

Kush Mehra, chief business officer of Pine Labs, concurs. “Many of the customers are first-time credit seekers attracted to the idea of instant paperless credit approval.”

Offline ‘Pay Later’: Vivifi India Finance, a Hyderabad-based non-bank lender, has launched FlexPay, which offers the facility using the Unified Payments Interface (UPI). Says Anil Pinapala, Vivifi CEO: “The product facilitates offline purchases by scanning any UPI QR code or a UPI ID of salaried and self-employed individuals. It works like a digital credit card.” 

Even banks offer this facility on cards. Says Sanjeev Moghe, executive vice-president and head (cards and payments), Axis Bank: “We run EMI programmes that are loans to finance purchases initiated on a debit card. Repayment is according to an agreed-upon schedule.”

How it works: The customer registers and uploads necessary documentation. The provider runs a credit score check and approves of, or rejects the application. The approval comes with a credit limit.

Interest rate: For items with no-cost EMI option, customers pay zero interest. But there could be late payment fee of a few hundred rupees. Some players allow EMIs with interest cost attached, which could be 13-18 per cent in case of some. Others could charge as much as 36 per cent. Almost all players offer an instant refund if you cancel your order or return the product.

it’s a seamless process With registration time of a minute and one-click payment option without OTP. Says Mayank Kachhwaha, co-founder and chief operating officer, IndiaLends: “This is good option for those without access to credit, and also for those with access to credit, but who want a single-click process.” He adds that it is less likely to be used by mature credit card users, as cards offer 45 days’ interest-free period and reward points, too. Also, your credit score improves on regular repayment. Kachhwaha suggests that one should only go for the ‘Pay Later’ facility if it carries no interest charge. It should be lower than what you get through a personal loan or credit card.    

Finally, since this is easy to access, buyers should be wary of getting into a debt trap.