Buy Now, Pay Later: Limit instalments to 10-15% of income, restrict usage
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar cautioned about auto-debit charges and one-sided clauses, suggested keeping total EMIs and card dues within 30–40% of income, and advised seeing BNPL as borrowing rather than free credit.
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
Business Standard looks at Buy Now, Pay Later plans after a festive-season rise in quick credit. The article explains how BNPL works, its effect on credit scores, hidden costs and red flags, who should avoid it, and repayment habits such as keeping instalments to a small share of income.
Publisher source
Buy Now, Pay Later: Limit instalments to 10-15% of income, restrict usage