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When Should You Use 'Buy Now, Pay Later' or Personal Loans?
Need to borrow funds for an expensive purchase? Find out if Buy Now, Pay Later or Personal Loans may suit your financial needs better.
If you need to make a big purchase soon, parting with a large sum of money in one go might not be on the cards if you have insufficient funds or require it for other equally urgent needs.
Thankfully, this financial conundrum is not one you will have to take on alone. You can choose between Personal Loans or Buy Now, Pay Later plans to help make these expenses easier on your wallet.
Both options offer you more affordable options to get what you need, by giving you a loan and allowing you to pay back in smaller instalments.
But which one of these should you choose and how can they help with your needs?
Before diving in, take a crash course in understanding what Buy Now, Pay Later is and the differences between Secured and Unsecured Loans.
How Does a Buy Now, Pay Later Plan Work?
In a nutshell…
- Buy Now, Pay Later breaks down your purchase into small, short-term instalments over a period of three to four months
- There’s no interest rate accompanying these instalment plans
- Buy Now, Pay Later providers pay merchants first on your behalf, essentially loaning you the necessary funds upon purchase
How Does a Personal Loan Work
In a nutshell…
- Personal Loans are sums of money lent to your first. The funds borrowed are used at your discretion
- The loan is paid off in instalments over a slightly longer period, over 12 to 24 months
- Personal Loans also charge interest rates on funds borrowed
When to use, and what for?
Buy Now, Pay Later and Personal Loans may share some similarities. But, depending on the type of expense, one might be more suitable for you over the other.
| Buy Now, Pay Later | Personal Loans |
| Best for immediate shopoping needs such as buying luxury bags, furniture, skincare and clothing | Better for bigger-ticket items, such as renovations, luxury holidays, education, weddings and more |
| Some platforms have a fixed cap of S$3,000 for users, while others adjust these limits based on spending habits. The more you shop, the higher the limit | Larger sums can be borrowed, depending on your financial state |
| Zero-interest instalment period lasts only 3-4 months. Late payments may incure more charges | Processing fees and lower interest rates are charged on top of funds borrowed |
| Sufficient funds should ideally be avaibale soon in the bank to pay off the next instalments | Longer periods to pay off, less pressure to pay off immediately |
| Near-instant approval to use | Documents and credit reports are required for approval, may take some time before receiving funds |
