BNPL: Limit instalments to 10-15% of income and restrict usage to two plans
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar cautioned about clauses that shift all responsibility to users and automatic credit bureau reporting. He suggested using at most two BNPL plans, keeping total EMI and card dues within 30–40% of monthly income, and treating BNPL as a loan.
What Abhishek Kumar said
What warning signs should I look for in a buy now, pay later plan's terms?
If I have auto-debit switched on, I make sure the account always holds enough money, because a failed debit can mean being charged twice. I would also be wary of terms that put every bit of responsibility on the user, credit applications turned down with no explanation, and plans that report to credit bureaus automatically, since that reporting can damage a credit score.
How many BNPL plans should I use, and how much of my income can go to repayments?
I suggest using no more than two BNPL plans at a time so they stay easy to track. Taken together, BNPL instalments, credit card bills and EMIs should stay within 30–40% of monthly income. I would switch on auto-pay only once I have checked the balance, and keep aside a cushion equal to one month of dues so that penalties and overdraft charges do not arise.
Is buy now, pay later a form of free credit?
No. In my view BNPL is a loan and should be treated as one. I would use it only for planned, essential purchases that I could have paid for in full upfront, not for impulse buys or recurring spends. If you are new to it, begin with small amounts to learn how the repayment cycle works. And if your income cannot comfortably meet the instalments within the tenure, BNPL is likely to hurt more than it helps.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on debt and loans
The article explains how Buy Now Pay Later plans work after a festive-season rise in short-term credit. It covers benefits for disciplined users, effects on credit scores, hidden fees and late-payment costs, red flags in the fine print, who should avoid BNPL, and tips such as capping instalments at 10–15% of income.
Publisher source
BNPL: Limit instalments to 10-15% of income and restrict usage to two plans