Offering your customers different payment options can help create long-lasting relationships with them and boost sales. Our Nortridge loan management software includes the ability for your customers to set short-term installment loans up, also known as the buy now, pay later arrangement or, website payment plans (if you plan to sell on your website.). In this blog post, we'll go over what buy now, pay later payment methods are, how they work and why you should consider offering them to your customers. Keep reading to learn more!
What is Buy Now Pay Later?
The buy now, pay later payment method (BNPL) is a short-term installment loan that is secured when the need for personal or business capital arises. Just as its name suggests, the BNPL arrangement allows a customer to walk away with the product or service they need today while they promise to pay it off over time, usually in a series of 3-5 installments. This is a nice payment option for a business to offer, as it creates a convenient way for your customers to pay for your products and services in pieces versus all at once.
Some might think this sounds a lot like credit purchases, however, it's not the same at all. In fact, many consumers prefer to arrange a BNPL loan over using credit cards, and for good reason. These short-term installment loans don't typically require a hard credit check in order to qualify and there is no interest owed on the principal. Therefore, neither applying for nor being approved for a BNPL loan will either help or hurt a consumer's credit score. While these loans do not usually appear on their credit report and won't help them build credit, paying them off according to the installment agreement does keep them in good standing with you, the business they purchased from.
How Does Buy Now Pay Later Work?
While available in some stores, you'll usually encounter the option to purchase a product or service using the BNPL method during your time shopping online, including purchases made on mobile apps - oftentimes these loans will be listed as website payment plans. These repayment plans come in all shapes and sizes. One quite common installment loan allows the purchaser to split the cost of the product into four, interest-free, biweekly payments. The first installment might either be due at checkout or made to become due in two weeks.
Application Process for Buy Now Pay Later Loans
The application process for a BNPL loan is pretty straightforward. It usually requires basic information from the borrower, such as their full name, email address, phone number and date of birth. Your customer will need to be at least 18 years old, give a mobile phone number and provide the debit or credit card (or bank account) from which they will make the payments.
The only time a credit check might be required with a BNPL is when a borrower needs a larger amount of money, and a longer period of time for repayment, such as a commercial loan. These particular customers, especially, will want to be sure and read over all the details of the loan so that they understand how this type of repayment arrangement might impact their credit.
Since these short-term installment plans don't charge interest, you don't have to provide the standard credit disclosures that other types of loans come with. You will just want to provide an agreement that includes a payment schedule, showing payment amounts and due dates. Along with this payment schedule, you'll want to include the terms of the agreement, such as late payments and refunds, as well as an arbitration clause. Your customer will want to read through these documents before agreeing to the loan, so that they are aware upfront of any fees, charges and costs for which they may become responsible.
Nortridge's loan management software can be customized to ensure the application process is easy for your customers..
Are there Risks for Buy Now Pay Later Borrowers?
As with any purchase, before committing to a BNPL loan, the purchaser should be certain they can afford to repay the total amount of it in accordance with its terms and conditions. While most of these installment loans don't charge interest, there are repercussions for the borrower of missing payments, such as late fees.
Consumers should be aware that BNPL loans lack many of the protections that credit cards offer. For one, BNPL loans won't be able to dispute purchases that end up being scams, as they are not backed by any dispute protections.
It's also important for borrowers to know that returns of the merchandise purchased can tend to be complicated. They may actually be responsible for continuing to pay for the product or service until the dispute is resolved. As the merchant, you will want to be sure and keep your BNPL loan terms and return policies available and give your borrowers copies of them.
You are fully protected against risks as the provider of short-term installment loans. If your customer misses a payment on their BNPL loan, you can rest easy knowing that you do have protections in place. You, as the lender, can make it clear to your borrower from the start that you (the lender) have the power to freeze their account for non-payment, stopping them from making further purchases until the debt is paid off. If, after a time, the debt is still owing, it can be turned over to a debt collector and reported to a credit reporting company.
You'll need to have the tools at your fingertips to stay protected. It's best practice to ensure you're managing and tracking your loans effectively. We suggest using our loan management software to make your lending life easier.
Reasons You Should Offer Buy Now Pay Later Solutions
Here are the 6 reasons why you should offer Buy Now Pay Later Loans
1. More people than ever are using buy now pay later payment methods
Short-term installment loans have been on the rise throughout the past decade, but never so much as now. During the covid-19 pandemic, the buy now, pay later option became increasingly popular, as it was a creative way for businesses to serve those financially affected by losing their jobs or getting laid off for a time, and businesses having to completely close their doors, to be able to continue functioning somewhat normally. This created a win-win situation - businesses could continue making sales and struggling consumers could continue making purchases.
2. It's a great way to increase sales and grow your business
COVID aside, even in completely normal times businesses would naturally see more sales by having a buy now pay later option than they would without one. This is because there are always people with tight budgets and offering this type of arrangement dramatically increases your chances for more sales. It's sort of like a layaway option, only the item or service gets taken home or used immediately, vs waiting for all the installments to be paid first.
3. Get Paid Up Front and In Full
When your customers choose to pay in installments with the BNPL option you offer, and hit the “Buy Now” button, you, the merchant, are instantly paid in full and the responsibility to repay that loan is fully on the borrower. Offering your flexible payment options, you just made a sale that might not have been possible for that customer, otherwise.
4. You can offer a variety of loan products and payment plans
Through our innovative loan management software, you can offer your customers a variety of customizable loan products to fit their needs; amortized payments, simple interest, interest-only, percentage and fixed-principal reductions, step payments, and custom payment schedules are just a few of the many different types of plans available with NLS.
5. Rise above the competition
While BNPL loans are more popular than ever, not every company offers them. You might be the one who gets the sale because you were the one who had this convenient way for the consumer to make their purchase possible. Rise up through the ranks of your industry with our cutting-edge loan management software. Be competitive and get that buy now pay later option into your offerings!
6. Build customer loyalty and encourage repeat business
Buy now pay later loans are just one way in which you can offer your customers the opportunity to buy items with confidence and security, knowing they can spread out their payments over time, if needed, and without finance charges or interest rates! They will come to you time and time again, knowing that they can count on you to get them what they need right away, with flexible payment options. You're giving some people the very break they might need when life gets tough or their finances change! They won't forget you for this support.
Nortridge Has the Best BNPL Options for Your Customers
Here at Nortridge, we offer a buy now pay later software that handles everything from loan origination and servicing loans, to management and collections. Rapidly scale while simultaneously reducing overhead costs by using workflows and automation, and the ability to create, service and manage buy now pay later loans. With our integration suite, you can even configure your software with buy now pay later no credit check with instant approval, which can strongly increase your sales overall.
Stay protected and manage your buy now pay later loans effectively with Nortridge today! Schedule a demo online today and see how Nortridge can help your business with buy now pay later solutions.
You can't go wrong with Nortridge's Buy Now Pay Later Software. We have all the best BNPL options for your customers!
Check out our affordable pricing and what's all included when you secure our loan software platform for your business. Be sure and schedule a demo today so you can get a customized quote that fits your lending model or lending scenario. During our 15-minute discovery call, we want to learn all about you and your needs. If we find we are a good fit for each other we will run through a custom demonstration of the software with you. No one else does it like Nortridge.