What Is A “Pay Later” Service & Can A Pay Later Purchase Impact My Credit Score?
Pay later services are just like your credit card; they offer interest-free credit for a specific number of days, but the repayment is directly linked to your savings bank account for direct debit.
Introduction
Not everyone is eligible to get a credit card. Credit card companies have tightened the criteria to issue credit cards. Applicants have to have an impeccable credit report, a healthy credit score and a good income to prove their repayment capacity to avail a credit card in the market. Also, there is a general apprehension in many low-income earners in getting a credit card as they know that credit cards can lead to bad debt.
That is when lenders came with the idea of Pay Later credit services.
Many e-commerce sellers have tied up with banks and NBFCs to provide this service to their customers. This service attracts buyers, without a credit card, to purchase high-value items by availing of a short term credit facility.
What are some of the attractive features of pay later services?
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They are processed instantly.
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There is no documentation needed. They calculate your eligibility based on your phone number, PAN and Aadhaar details.
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It allows you to make purchases on credit without the need for a credit card.
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Comes with a convenient repayment tenure of 3 – 12 months to suit your needs. Pay Later services are generally linked to your savings bank account and your credit score.
The Concept of Embedded Finance
Embedded Finance refers to credit relationships of the above type. The primary objective is to attract customers who don’t hold a credit card but want to purchase consumer durable goods on credit. Here a company partners with a lender, who verifies the customer and offers them a credit line.
