The ‘Buy Now Pay Later’ Trap: 5 Hidden Risks of Using Services like Simpl & Lazypay
In today’s fast-paced digital economy, Buy Now, Pay Later (BNPL) services have revolutionized how consumers shop. Platforms like Simpl and Lazypay offer the allure of instant gratification—buy your favorite gadget, outfit, or even groceries now, and settle the bill in convenient installments later. With no upfront payments required in many cases and promises of zero interest, these services have exploded in popularity, especially among millennials and Gen Z in India. According to industry reports, the BNPL market in India is projected to grow exponentially, driven by seamless integrations with e-commerce giants like Amazon, Flipkart, and Zomato.
But beneath this convenience lies a potential financial minefield. While BNPL providers market their services as flexible and hassle-free, many users remain oblivious to the hidden risks that can lead to debt spirals, damaged credit profiles, and unexpected costs. This article serves as a critical consumer warning, shedding light on five major downsides of using BNPL apps like Simpl and Lazypay. By understanding these pitfalls, you can make informed decisions and avoid falling into the ‘buy now pay later’ trap. Whether you’re a frequent online shopper or considering BNPL for the first time, arming yourself with knowledge is key to protecting your financial health.
As BNPL adoption surges, regulators like the Reserve Bank of India (RBI) have started scrutinizing these platforms for issues like reckless lending and hidden fees. Yet, consumer complaints continue to rise, highlighting the need for caution. Let’s dive into the specifics.
1. The Impact on Your CIBIL Score: A Silent Credit Killer
One of the most overlooked risks of BNPL services is their direct influence on your credit score, particularly through India’s primary credit bureau, CIBIL (now part of TransUnion CIBIL). Unlike traditional cash purchases, BNPL transactions are essentially short-term loans, and providers like Simpl and Lazypay report payment behaviors to credit agencies. If you miss a payment—even by a day—it can be flagged as a delinquency, leading to a dip in your score.
For instance, LazyPay explicitly states that while they may not perform hard credit checks initially, late or missed payments can result in negative reporting to CIBIL, which harms your credit profile. Similarly, Simpl’s terms indicate that unpaid bills can lead to credit bureau notifications, affecting your ability to secure future loans, credit cards, or even rentals. A single missed installment, no matter how small, can disrupt your CIBIL score for months, as these reports linger on your credit history.
Research shows that BNPL usage can indirectly lower scores in other ways too. Opening multiple BNPL accounts reduces the average age of your credit accounts, a factor that accounts for about 15% of your FICO or CIBIL score calculation. In India, where young consumers are increasingly turning to BNPL for everyday expenses, this has led to a noticeable shift in credit behaviors. A Fortune India report warns that delayed BNPL repayments are treated like regular loan defaults, potentially tarnishing your score with even one oversight.
To mitigate this, always check your CIBIL report regularly—it’s free once a year—and prioritize BNPL payments as you would any EMI. Remember, a healthy credit score is crucial for long-term financial goals like home loans or business funding. Ignoring this risk could turn a simple shopping spree into a credit nightmare.
2. Hidden Late Fees: The Costly Sting of Delays
BNPL services often tout “no interest” or “zero hidden charges,” but the reality is far from fee-free, especially when payments are delayed. Platforms like Simpl and Lazypay impose penalties that can quickly escalate, catching users off guard and turning affordable purchases into expensive debts.
Simpl, for example, charges a late penalty of up to Rs. 250 plus applicable GST for missed due dates. This flat fee applies regardless of the bill amount, making it disproportionately harsh for smaller transactions. LazyPay, on the other hand, levies a daily penalty of Rs. 15 or up to 4% of the bill plus GST, which can accumulate rapidly if ignored. A Business Today analysis highlights how these fees transform interest-free plans into high-cost burdens, with effective APRs reaching as high as 68% when late charges are factored in.
These penalties are often buried in the fine print, leading to surprises for users who assume BNPL is truly cost-free. In India, where BNPL is still lightly regulated, such fees contribute to broader concerns about predatory practices. A report from Australia’s treasury, echoed in Indian contexts, notes that late fees inflate the true cost of borrowing, especially for low-income users.
Consumers should set reminders for due dates—typically every 15 days for these apps—and opt for auto-debit to avoid slips. If fees do hit, contact the provider immediately; some may waive them for first-time offenders. Ultimately, these “hidden” costs underscore why reading the terms is non-negotiable.
3. Encourages Overspending: The Debt Cycle Starter
The seamless nature of BNPL—tap to buy, pay in installments—makes it dangerously easy to overspend, often leading to unmanageable debt. Services like Simpl and Lazypay eliminate the immediate pain of payment, psychologically tricking users into purchasing more than they can afford.
Studies reveal stark statistics: BNPL users are 9% more likely to make purchases, with spending likelihood jumping from 17% to 26% upon adoption. First-time users see an average spending increase of $130, sustained over weeks. Among younger borrowers, BNPL accounts for 28% of unsecured debt, far above the average. A Bankrate survey found that 45% of users buy items outside their budgets, 55% spend more overall, and 30% struggle with repayments.
In India, this trend is amplified by aggressive marketing on apps like Zomato and Swiggy, where small-ticket items add up quickly. Critics argue that BNPL’s installment framing (e.g., “4 payments of Rs. 250”) minimizes perceived costs, encouraging impulsive buys and debt accumulation.
To break this cycle, track all BNPL dues in a budget app and limit usage to essentials. Remember, what starts as convenience can end in financial stress if not managed wisely.
4. Complicated Terms & Conditions: Navigating the Fine Print Maze
BNPL agreements are notoriously dense, packed with clauses that can confuse even savvy consumers. Simpl and Lazypay’s terms often include variable fees, data-sharing policies, and repayment nuances that aren’t immediately clear, leading to unexpected obligations.
A Dvara Research report flags concealed information, unspecified charges, and data privacy concerns in Indian BNPL platforms. Costs can vary widely: pre-default APRs start at 0%, but post-default, they can hit 60% with penalties. LazyPay’s flexibility in repayment terms sounds appealing, but ignoring deadlines triggers late fees and interest.
These complexities place the onus on users to decipher legalese, often during checkout when decisions are rushed. In disputes, vague clauses can favor the provider, exacerbating issues.
Always read the full terms before signing up—look for sections on fees, defaults, and cancellations. If unclear, seek clarification via customer support to avoid regrets.
5. Difficult Dispute Resolution: When Things Go Wrong
What if your purchased product arrives damaged or the service fails? BNPL’s dispute processes can be frustratingly opaque, leaving consumers in limbo. Unlike credit cards, which offer robust protections, Simpl and Lazypay often lack streamlined resolution mechanisms.
Complaints data shows thousands of issues against these providers, including unauthorized charges and refund delays. In India, BNPL products generally lack the safeguards of traditional credit, imposing high costs on defaulters without clear recourse. Users report difficulties in pausing payments during disputes or securing refunds.
Globally, regulators like the CFPB have pushed for better dispute rights, but in India, enforcement is spotty. If problems arise, document everything and escalate to the RBI’s consumer portal.
In conclusion, while BNPL services like Simpl and Lazypay offer undeniable convenience, their hidden risks— from credit score damage to overspending traps—demand vigilance. By staying informed, budgeting wisely, and using these tools sparingly, you can enjoy the benefits without the pitfalls. Share this with friends to spread awareness and promote smarter financial choices. Always prioritize long-term stability over short-term splurges. You can visit Lazypay official page: https://lazypay.in/pay-later
You may also like to read: https://khabarkhabri.com/income-tax-bill-3024/