Instant Personal Loan Vs BNPL: Updated Guide

Rohan, a 29-year-old IT professional, looked at his "phone—"Shaadi ka budget toh haath se nikal raha hai!" With just 3 months to go, expenses were piling up—₹5,00,000 for the venue, ₹3,00,000 for the catering, and ₹2,00,000 for his sherwani. He needed ₹10 lakh urgently.

While scrolling through his banking app, two options popped up:

Instant Personal Loan: "Ek baar lo, aaram se chukao!" Get ₹10 lakh instantly and repay interest in 12-60 months.

BNPL (Buy Now, Pay Later) – "Aaj kharido, aaram se bharo!" By dividing your purchases into 4-6 EMIs, and usually on a 0% interest rate, you can pay as long as you make your installments promptly.

Rohan found himself in a difficult situation, thinking, "Should I take a loan for full ownership or go for the flexibility of BNPL?". If you’re having a similar experience, let’s discuss options and debate which option is wiser for this year.

Instant Personal Loan: Speed Meets Flexibility

It is an unsecured loan that can cover various financial expenses, including medical bills, weddings, education, travel, home renovations, and more.

Key Features

• Fast Money Transfer: The lender puts cash in your bank account within a day, sometimes right away.
• No Need to Put Up Assets: You don't have to offer anything as a backup for this type of loan.
• Choose Your Payback Time: You can pick how long you want to pay back, from 6 months to 5 years.
• More significant Loan Options: If you have a good credit history, you can borrow between ₹10,000 and ₹50 lakh or even more.

BNPL Explained: How Consumer Credit Is Changing

It is a form of short-term borrowing that enables an individual to make a purchase directly with minimal or no down payment and settle it over time.

Read More - Personal Loan vs. Buy Now, Pay Later

Key Features

• No Interest for a While: You don't pay interest on most BNPL plans for a short time, 30 to 60 days.
• Skip the Credit Check: Many BNPL companies don't do hard credit checks, so people without a credit history can use them.
• For Smaller Buys: It works well for buying things that cost less than ₹50,000.
• Easy to Use Online: You'll find it in big online shops like Amazon, Flipkart, and Myntra, making it simple to buy things.

Instant Personal Loan Vs BNPL: Key Differences

Instant Personal Loan – ‘ek Baar Lo, Araam Se Chukao!’

Eligibility

• Age: 21-60 years
• Monthly Income: ₹20,000+ (₹30,000+ for metropolitan cities)
• Employment: Salaried (private/govt) or self-employed
• Credit Score: 700+ preferred
• Work Experience: 6+ months (salaried) /2+ years (self-employed)

Who Can Qualify?

• Working professionals needing a big loan (₹50,000 - ₹50 lakh)
• Self-employed individuals with stable income
• People with a good credit history

If we take Rohan’s case, he had a stable job and a 750 credit score; he can easily qualify for a ₹1,00,000 loan with a 12-month EMI plan. This loan can give him full control over his wedding expenses.

Bnpl (Buy Now, Pay Later) – “Aaj Kharido, Tension Free Chukao!”

Eligibility

• Age: 18+ years
• Monthly Income: ₹15,000+
• Employment: Salaried, self-employed, or even students (with a source of income)
• Credit Score: 650+ (some providers allow new users with no credit history)
• KYC: Basic PAN and Aadhar verification required

Who Can Qualify?

• Young professionals and students for small ticket purchases
• People with a low or no credit history
• Online shoppers who prefer 0% EMI options

For example, if Rohan decides to use BNPL for smaller purchases, like booking his honeymoon tickets on 0% EMI and buying wedding outfits in easy 4-month installments. It will keep his cash flow flexible.

The Effect on Credit Scores

Instant Personal Loans

• Positive Impact: On-time repayments can help enhance your credit score, as lenders are required to report to credit bureaus like CIBIL, Experian, and Equifax.
• Negative Impact: Defaults or missed payments may seriously damage your credit record.

BNPL

• Limited Impact: Most BNPL providers do not report to credit agencies unless you default. However, some providers are beginning to report BNPL activity, which could influence your credit score in the future.

Risks And Pitfalls to Watch Out For!

Instant Personal Loans

• High Interest Rates: They can go up to 24% annually, making repayments expensive. 
  
  
• If Rohan takes a loan of ₹10,00,000 at an 18% interest rate for 3 years, his total repayment will be around ₹12.47 lakh. Shelling out ₹2.47 lakh extra as interest.
  
  
• Strict Eligibility: A good credit rating (700+) and steady income is expected. A rating of less than 700 or irregular income can result in loan denial or increased interest rates.
  
  
• Credit Score: Missed EMIs and hard inquiries can decrease your credit score.
  
  
• In Rohan’s case, missing one EMI (₹34,641 for his loan) can drop his credit score by 50-100 points.
  
  
• Prepayment Charges: A few lenders impose charges for prepaying loans.
  
  
• Assuming Rohan wishes to pay off his loan ahead of time, he might have to pay a 2-5% foreclosure charge, which could be ₹20,000-₹50,000.
  
  
• Debt Burden: Long-term financial stress unfolds when large loans are mishandled.
  
  

BNPL (Buy Now, Pay Later)

• Hidden Interests and Charges: Excessive late fees or interest charges will apply if you fail to make a payment when due.

The unmanageable payment of BNPL installments for Rohan will result in late fees that range between ₹500 and ₹1,000 each month when he buys a ₹50,000 phone. BNPL transforms his debt into a high-interest loan resulting in payments that will exceed ₹60,000 because of interest rates in the range of 24% to 36%.

• Quick credit approvals from lenders trigger consumers to buy more than required, thus building substantial debt levels.

The frequent BNPL purchases of clothing and electronics by Rohan, alongside holiday payments, will result in monthly debts ranging between ₹30,000 and ₹40,000, leading him to develop unnecessary debt.

• Short-Term Repayment Period: Most BNPL schemes have a repayment period of 4-6 months, which is difficult to pay. A ₹20,000 purchase over 4 months translates to ₹5,000 every month; thus, repayments may become burdensome.
  
  
• Credit Score: If payers report late payments, your credit score may decrease, and it may become hard to get loans in the future.
  
  
• Limited Credit Building: If the providers do not make reports, responsible use won't help enhance your credit score.

FUTURE OF INSTANT PERSONAL LOANS IN 2025

IN THE YEAR 2024

IN THE YEAR 2025

DESCRIPTION

Approval Time

24-48 hours

5-15 minutes (AI-driven approvals)

Loan disbursals will be instant for pre-approved borrowers.

Interest Rates