For instant gratification and enjoyment, many people take out loans instead of deferring spending on non-essential goods and services.
It is generally said that loans should only be taken out to acquire fixed assets or to increase one’s earning capacity. However, people often take out loans in various forms – like credit card loans, Buy Now Pay Later (BNPL), personal loans, mortgages, etc. – for the consumption of goods and services.
Personal loans are generally expensive, and if dues are not paid by the due date, loan takers end up paying higher interest rates. But for instant gratification and enjoyment, many people take out loans instead of deferring spending on non-essential goods and services.
âThe obvious advantage of BNPL and Personal Vacation Loans is that you can have easy and immediate access to a higher vacation fund that allows you to have the vacation experience of your dreams without restrictions. Especially if you already have an outstanding loan and / or if you are not in the traditional lending system (banks) for some reason, these short term loans can meet your needs, âsays Anshuman Narain, vice-president. president of CashBean (PCFinancial Services Pvt Ltd.).
However, the short-term happiness that comes with buying goods and using services on credit can give you long-term problems repaying contributions.
âNow, while there is easy access to credit through these new channels, the real danger is that if one is used to BNPL and personal loan for regular, high-value expenses, the The borrower’s household economy can have negative long-term consequences. Holidays are a function of lifestyle, so you have to try not to put too much strain on finances for intangible short-term gains, âNarain said.
Comparing the options of BNPL and personal loan, Anil Pinapala, CEO and co-founder of Vivifi India Finance, said: âGoing on vacation during the Covid era could be expensive, and even unaffordable for many. However, you can opt for the BNPL option or benefit from a personal loan to ease the financial burden.
âThe process of obtaining a personal loan is quick and gives borrowers the option of borrowing a small amount of money. It also carries a lower interest rate than credit cards and could potentially increase your credit score. Personal loans have their downsides, such as missing a payment or making a late payment could hurt your credit score, âhe added.
âThe 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 seconds at checkout. However, don’t let BNPL trick you into spending money that you don’t really have, âPinapala added.
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