Buy Now Pay Later - Good Idea?

Today’s blog is a continuation of our not so long-ago appearance in the Financial Review news article relating to the emergence of the Buy Now, Pay Later (BNPL) market.

If you happened to miss out the many insights proposed by the “Mr. Tyndall” you can catch up here.

What is BNPL?

Buy Now Pay Later (BNPL) products such as UnLock, are short-term loans (typically 30,60 or 90 days) given to businesses to make purchases. If you are wondering where the money comes from, well, that’s when you come in. Institutions such as Marketlend, pool investors’ money together to fund business expenses.

How does investing in this scheme add value for investors?

Investing in a BNPL loan can be ideal for investors that want to achieve a return in a shorter period of time.

The high liquidity of a BNPL loan is what makes it an attractive investment for investors. For example, the investment BNPL loan may be sold (on an exchange if offered) or converted to cash after a period of 30, 60 or 90 days.

**BNPL providers such as UnLock **offer to investors on a marketplace a selection of loans borrowers have requested.

However, investors should be aware that the repayment term is set by the borrower.

What are the pros and cons for investors?

Pros

1. Enjoy returns in a shorter time.

This can be a great alternative for investors that do not want to keep their money invested in one place over a long period of time or may want to spread their investments over smaller periods to hedge effects of the economy.

An investment in BNPL loans can be ideal for investors who require money in the near future.

Also, some institutions, such as UnLock offer a revolving line of credit to the borrowers, therefore if you are happy with the returns, you can simply keep investing.

2. Higher Yields

Investments in Buy Now Pay Later loans can offer the potential for higher yields than regular savings accounts.

3. Invest small and still enjoy a return.

For example, investors in UnLock loans can achieve returns from investments of as little as $100.

Sometimes, share investing requires a minimum of $500, and in to get a reasonable rate of return from the banks on a term deposit, you will likely need to have a significant chunk of your disposable income sitting there.

Yes, your money is still working for you in a term deposit, but it can perhaps work faster with an investment in a BNPL loan.

Cons

Like with every investment, you must consider the risks. For example, economic disruptions slowing down a business’s operations can lead to repayment delays.

However, in the event this does happen, some BNPL providers charge late borrowers a late fee.

Hopefully, you have gained a new perspective on the possible opportunities a Buy Now Pay Later can offer investors.

Do you have questions about how you can begin investing with Marketlend? Contact us today to discuss it.