Buy Now Pay Later – The Hidden Dangers

cairns mortgage broker jason thomson


The Buy Now Pay Later sector is winning-over the youth demographic with the promise of instant gratification, but with every sugar-high comes the risk of a corresponding low.

‘Buy Now Pay Later’ providers such as AfterPay and Zip Pay have experienced massive growth in popularity, with the number of users reportedly jumping from 400,000 to approximately 2 million between 2015 and 2018.

Driven by a simple proposition whereby the Buy Now Pay Later provider pays the merchant on behalf of the customer, allowing the customer to obtain the goods or receive a service immediately while subsequently paying off the debt generally through instalments, Buy Now Pay Later presents a tempting offering.

But as the sector’s breakneck growth continues, finance professionals are warning users, particularly in the younger demographic, to be cautious of overdoing it as this could risk effecting their chances of securing a personal loan, car loan or home loan further down the track.

It’s the layby of our day but in reverse. It’s your forward credit for an item. You get the item or service and pay it off over instalments, so you’re actually putting forward your expenditure and creating a liability.

This might be okay for someone that manages their money well, if they pay off the item on time. But the concerning risk is this incentivising people to spend money they don’t have, more so on lifestyle items?

There may also be a stigma associated with using Buy Now Pay Later schemes rather than paying up-front and in-full. Utilising this payment method may potentially send the wrong message to a bank. If a lender sees a ‘buy now pay later’ provider frequently on a client’s bank statements, that can trigger more questions about their spending behaviours and ultimately may mean they choose to decline the application. I would much prefer to see my clients save for the item and demonstrate those good habits.

If you are concerned about your level of expenditure then I encourage you to check out our Budget Planner which could set you on the right path. It’s important to appropriately manage your expenses well in advance of applying for a loan, that way you can show the bank that you are responsible with your money management and can afford to service a loan when the time comes.


Cairns Mortgage Broker – Jason Thomson is a Mortgage Adviser and Finance Broker based in Cairns with clients all around Australia. Client reviews featured on his website prove that Jason is a trusted industry professional, facilitating great outcomes for his clients. Using his wealth of experience in financial services, he thrives on delivering superior service. Jason is very approachable and is always looking for new clients to help in the often confusing world of finance and property. Offering a no fee service, you’ve got nothing to lose by having an obligation free chat with Jason today.