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When should you use ‘buy now, pay later’ or personal loans?
When should you use ‘buy now, pay later’ vs personal loans
Need to borrow funds for an expensive purchase? Find out if Buy Now, Pay Later or Personal Loans 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 — with varying degrees of flexibility.
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, with higher charges for late/missed payments
- 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 provide you with a lump sum of cash upfront you can use however you like
- Gives you more flexibility with a choice of payment terms and longer periods — up to 60 months
- Affordable interest rates over the long term
- Processing fees are waived in some cases
WHEN TO USE, AND WHAT FOR?
While both Buy Now, Pay Later and Personal Loans seem similar in functionality, understanding the advantages of each one is important in choosing appropriately for your needs:
| Buy Now, Pay Later | Personal Loans |
| Typically used for immediate shopping needs such as buying luxury bags, furniture, skincare and clothing | Ideal for bigger-ticket items, such as renovations, 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 | Greater flexibility with your choice of a 12- to 60-month instalment period, plus access to higher loan amounts Some promotional offers may include cash back on your loan amount |
| Zero-interest instalment period lasts only 3-4 months. Late payment charges can be very costly | Processing fees may apply, and lower interest rates are charged over the entire loan period |
| Sufficient funds should ideally be available soon in the bank to pay off the next instalments | Eases up your cash flow with the option of longer payment tenors, lessening the pressure to pay off the entire loan |
| Near-instant approval to use | Easy and convenient, especially with a valid credit card from the bank — funds can be approved for and disbursed within the same day |
Remember to take careful consideration of the points above before selecting either option. This is especially so if you need more manageable instalments, making Personal Loans cpreferable with the flexibility in payment terms it provides. Also, ensure your funds are sufficient to prevent any additional costs incurred from late payments, particularly with Buy Now, Pay Later.
We are providing you these financial literacy information (including any videos) (“Information”) for your general information only. We do not intend for you to use the Information as accounting, legal, regulatory, tax, financial or any other type of advice. Before making any financial decisions, please speak with your own professional advisors on the suitability of the product. We make no representation or warranty as to the accuracy and completeness of the Information. We are not liable if you suffer any losses arising from your reliance on the Information.
