It’s usually said that loans should be taken only for acquiring fixed assets or to enhance one’s earning capacities. People, however, often take loans in various forms – like Credit Card loans, Buy Now Pay Later (BNPL), personal loans, mortgage loans etc – for consumption of goods and services.
Personal loans are generally expensive and in case the dues are not cleared within the due date, loan takers end up shelling out higher rates of interest. But for instant gratification and enjoyment, many people take out loans instead of postponing the expenditures on unessential goods and services.
“The obvious benefit of BNPL and Personal Loans for vacations is that you can have easy and immediate access to a higher corpus holiday fund which enables you to have the holiday experience of your wish without curtailment. Especially if you already have an existing loan ongoing and/or are out of the traditional lending system (banks) due to some reason, these short term loans can gratify your needs,” says Anshuman Narain, Vice President, CashBean (P.C.Financial Services Pvt Ltd).
However, the short-term happiness derived by buying goods and availing services on credit may give you long-term trouble of repaying the dues.
“Now while there is ease of access to credit through these new channels the real danger lies in the fact that if one is habituated to BNPL and personal loan for regular high value spending then the household economy of the borrower can have negative long term consequences. Holidaying is a function of lifestyle so one should try not to over-stretch finances for short term non-tangible gains,” said Narain.
Comparing the options of BNPL and personal loan, Anil Pinapala, CEO & Co-Founder of Vivifi India Finance said, “Going on a holiday in the times of Covid could be expensive, and even borderline unaffordable for many. However, you can opt either the BNPL option or avail a personal loan for easing the financial burden.”
“The process of availing a personal loan is quick and gives an opportunity to the borrowers to borrow a small amount of money. It also comes with a lower interest rate compared to credit cards and could potentially increase your credit score. Personal loans have its cons like missing a payment or making a late payment could hurt your credit score,” he added.
“BNPL service allows you to purchase items without paying for them all at once. When shopping online, you can usually get approved for BNPL within a few seconds at checkout. However, don’t let BNPL entice you into spending money you don’t really have,” Pinapala further said.
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