Debt, Credit & Buy-Now-Pay-Later: What You Need to Know in 2025

The modern Indian consumer has never had easier access to credit — from credit cards and instant personal loans to Buy-Now-Pay-Later (BNPL) apps at checkout. But with this convenience comes confusion and, sometimes, chaos.

So how do you use credit smartly without falling into a debt trap?Let’s decode the good, the bad, and the smart side of credit in India today.

What Is Debt and Why Do We Take It?

Debt simply means borrowing money today to pay later. It can help you buy a home, start a business, or manage emergencies — but when misused, it can drain your future income.

Types of Debt

• Good Debt: Helps build wealth or value (education loan, home loan, business loan).

• Bad Debt: Used for consumption or depreciating assets (credit cards, impulsive BNPL).

Rule of thumb: If debt increases your earning capacity or asset value, it’s productive.

Understanding Credit: The Foundation of Financial Trust

Every loan, credit card, or BNPL purchase you make affects your credit profile.

Your Credit Score

• Ranges from 300–900

• Above 750 is considered healthy

• Calculated by credit bureaus like CIBIL, Experian, CRIF Highmark

Key factors affecting it:

1. Payment history

2. Credit utilization ratio (keep under 30%)

3. Number of active loans

4. Credit age (older is better)

Maintaining a high score gets you lower interest rates and faster approvals.

Buy-Now-Pay-Later (BNPL): The New Debt You Didn’t Notice

BNPL is a short-term credit option offered by fintechs like ZestMoney, Simpl, LazyPay, Amazon Pay Later, and even UPI-linked credit lines.

You can buy a product instantly and pay later — usually in 3–6 easy installments.

Pros

• Instant approval, no paperwork

• Helps manage small-ticket expenses

• Builds credit history (if repaid on time)

Cons

• Encourages impulsive spending

• Late fees and hidden charges pile up

• Multiple BNPL accounts = multiple credit pulls

• Can silently lower your CIBIL score

Remember: BNPL = Credit. It’s not “free money.”

The Debt Trap: How It Starts

Most people fall into debt not because they borrow — but because they don’t plan repayments.

Common warning signs:

• Paying only the minimum amount on credit cards

• Using one loan to pay another

• Missed EMIs and rising late fees

• Stress over multiple apps and payment dates

Once your credit score drops, even genuine loans become expensive.

How to Manage Debt Smartly

1. Track Everything: Use like Excel, Zoho Expense to monitor EMIs and bills.

2. Pay on Time: Automate payments before due dates.

3. Consolidate Debt: If juggling multiple loans, consider a lower-interest personal loan to pay them off.

4. Keep Credit Utilization < 30%:Don’t max out credit cards.

5. Avoid Emotional Spending: BNPL and flash sales can create artificial urgency — pause before buying.

6. Build an Emergency Fund: 3–6 months of expenses keeps you from using credit for emergencies.

Smart Credit Habits for 2025

• Review your CIBIL report every 6 months (free check available on CIBIL/Experian).

• Use auto-debit for EMIs and SIPs to maintain discipline.

• Compare interest rates before taking loans — fintech isn’t always cheaper than banks.

• Learn your debt-to-income ratio (keep total EMIs < 40% of monthly income).

• Prefer secured loans over high-interest revolving credit.

Tax & Legal Angle

• Interest paid on home loans and education loans is tax-deductible under Section 24(b) and Section 80E respectively.

• BNPL and credit cards don’t offer deductions — they only increase liability.

PaisaNurture Insight

At PaisaNurture, we often meet clients who earn well but struggle due to scattered digital credit. Our planners help you:

• Restructure high-interest loans

• Build a repayment plan aligned to income

• Improve credit score for future wealth creation

Final Thoughts

Credit can be your best friend or your biggest stress — it depends on how you use it. Use it to build assets, not to fund lifestyles. And before saying “Pay Later,” always ask, “Can I afford it now?”