Here’s what you didn’t know about postpaid credit offers

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“Do you use Ola Postpaid? Did you know they might have taken out a loan in your name? Here’s how I found out I owed Rs 30k to a random bank…” a rant read. anger on the social media platform, Twitter. The user then recounted how he found out that a loan had been taken out in his name, apparently without his consent. He is not alone. With online platforms taking advantage of the retail credit boom, many users of “postpaid” accounts seem to misunderstand that these lines of credit are actually on-demand loans. If you were considering using such facilities or have ever been attracted to such a facility, here are some things you need to know when dealing with the postpaid facility offered by fintechs and e-commerce companies.

Postpaid offers, pay later

Postpaid accounts offer hassle-free payments without worrying about wallet top-ups. You can continue to pay using these postpaid services for up to 15/30 days (depending on your billing cycle) or until you exhaust your postpaid limit, whichever comes first. Essentially, they allow you to buy the service/product today and pay later.

The Ola Taxi app has OlaMoney Postpaid, which is a quick and easy way to pay for your Ola rides and other online services. Similarly, Paytm Postpaid has its own offer and provides up to Rs 60,000 credit. E-commerce majors such as Amazon offer similar convenience. For example, Amazon Pay Later provides instant credit, through an all-digital process, for purchases using EMI at Amazon.in at checkout. One can pay later next month or on EMIs ranging from 3 to 12 months. Amazon Pay Later is offered by Amazon Pay (India) in partnership with one of its third-party lending partners – Capital Float or IDFC FIRST Bank. ZestMoney, LazyPay, MobiKwik, Flipkart Pay Later are also in the Buy Now Pay Later fray.

Given the nifty digital integration and focus on faster processes, the majority of postpaid credit users on their smartphones often tick “accept” all the terms and conditions to gain access to the facility. Users find postpaid offers very convenient as they provide instant credit to make purchases.

Misunderstanding or lack of knowledge of how these products work on the back end is a problem when users “find” such loans on their credit report. Therefore, it is important to read the TnCs (terms and conditions), fine print and any FAQs (frequently asked questions) that are available on a particular installation. It’s safe to say that the word “loan” isn’t mentioned on signup, but terms like EMI, interest-free, and interest-free should alert you to the nature of the offer. Borrowers should check how the sanctioned limit, loan fees and other details will appear on their individual credit report. Borrowers should check how the sanctioned limit, loan fees and other details will appear on their individual credit report.

how they work

Regardless of the postpaid or paid offer platform, there are a few basic concepts you need to understand.

First, postpaid loans or pay later offers are designed as short-term financing. This means that if you do not clear unpaid dies within the free interest period, you may be liable for late fees. Late fees per month, in the range of ₹60 to ₹600, may be related to the outstanding amount. If one does not pay the statement amount by the due date, the lender may report the default to the credit bureaus, which may result in a lower credit score.

Second, the fintech or e-commerce platform offering the facility is not the entity lending you the money. There is always an NBFC entity or bank granting you the loan and therefore you are their borrower if you use the facility. The details of the lender are provided in the documents such as the welcome letter or the agreement, which are sent by email after successful registration.

Third, postpaid accounts come in variations. In some variants, there is no convenience fee, while others have such a fee (1-3% on monthly spend). Although activation may be free, the convenience fee may differ for each customer depending on the lender partner’s risk assessment policy. Some offers charge a usage fee, an amount added to your bill each month in case your cumulative purchases cross a threshold, such as ₹1,000.

Fourth, postpaid loans or buy-it-now-pay-later offers may not speak of the concept of interest. But note that when you opt for the EMI Postpaid or Pay Later programs, the interest rate and the actual amount of interest to be paid will be visible on the app/website when you select your EMI plan.

Fifth, any post-payment or later payment facilities you use will appear in your credit history/report as a loan for the limit amount assigned to you. The term of the loan will be as sanctioned by the lender. You can withdraw your consent by contacting the platform via the call center. You will be asked to clear your pending contributions, after which your account will be closed. The lender will also mark the account as closed after all dues have been cleared and this information may be reflected on your credit report with a lag.

Published on

March 12, 2022


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