"Do you use Ola Postpaid? Did you know they might have taken a loan on your behalf? Here's how I found out that I owe a random bank Rs 30k..." read an angry rant on social media platform, Twitter. The user then narrated how he found out that a loan was taken in his name, apparently without his consent. He is not alone. With online platforms cashing on the retail credit boom, many 'postpaid' accounts users seem to have little understanding that these credit lines are actually loans available on tap. If you were thinking of using such facilities or have been already enticed by one, here are a few things you must know when you deal with the postpaid facility offered by fintechs and e-commerce firms.

Postpaid, pay later offerings

Postpaid accounts offer hassle-free payments without you worrying about wallet recharge. You can continue to pay using such postpaid facilities up to 15/30 days (depending on your billing cycle) or till you exhaust your postpaid limit, whichever is earlier. Essentially, they let you buy the service/product today and pay later.

Cab hailing app Ola has OlaMoney Postpaid, which is a fast and easy way to pay for your Ola rides and other online services. Similarly, Paytm Postpaid has its own offering and provides upto Rs 60,000 credit. E-commerce majors such as Amazon provide a similar convenience. For instance, Amazon Pay Later gives instant credit, via a completely digital process, for purchases using EMI on Amazon.in during checkout. One can pay later next month or over 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 slick digital onboarding and emphasis on faster processes, a majority of postpaid credit users on their smartphones often tick 'agree' to all the terms and conditions to get access to the facility. Users find postpaid offerings highly convenient because these provide instant credit to complete the purchases.

The poor understanding or lack of knowledge about how these products work at the back end poses a problem when users 'find' such loans on their credit report. Hence, it is important that one reads the TnC (terms and conditions), the fine-print and all the FAQs (frequently asked questions) that are available about a particular facility. One can argue that the word 'loan' is not mentioned during sign-up, but terms such as EMI, no interest and interest-free should alert you about the nature of the offering. Borrowers should check how the sanctioned limit, loan dues and other details will appear on their individual credit report. Borrowers should check how the sanctioned limit, loan dues and other details will appear on their individual credit report.

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How they work

Irrespective of the postpaid or pay later offering platform, you need to understand a few basic concepts.

First, postpaid loans or pay later offerings are designed as short-term financing. This means if you do not clear the outstanding dies within the free-interest period, you may be liable to pay late fee. Late fees per month, in the range of ₹60 to ₹600, can be linked to the quantum of oustanding amount. If one doesn't pay the statement amount by due date, the lender can report the default in repayment to credit bureaus, which may lead to lowering of 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 that gives you the loan and hence you are their borrower if you use the facility. The details of the lender are provided in the documents such as welcome letter or agreement, that are sent on email post successful sign-up.

Third, postpaid accounts come in variants. In some variants there are no convenience charges, while others have such fees (1-3 per cent on monthly spends). While activation may be free of cost, the convenience charges can differ for each customer based on lending partner's risk assessment policy. Some offerings charge an usage fee, an amount added to your bill every month in case your cumulative purchases cross a threshold say, ₹1,000.

Fourth, postpaid loans or buy now pay later offerings may not talk about interest concept. But do note that when you opt for the Postpaid or Pay Later EMI schemes, the interest rate and the actual interest amount to be paid will be visible on app/website when you are selecting your EMI plan.

Fifth, Postpaid or Pay Later facilities used by you will reflect in your credit history/report as a loan for the amount of limit assigned to you. The loan period will be as sanctioned by the lender. You can withdraw your consent by contacting the platform through call centre. You will be asked to clear your pending dues, post which your account will be closed. The lender will also mark the account as closed post-settlement of all dues and this information may be reflected on your credit report with a lag.

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