Younger Australians, in particular, have embraced the relatively new ‘Buy Now Pay Later’ service offered through providers such as AfterPay and ZipPay, with the number of users reaching two million in 2018.1


If you haven’t heard of it yet, Buy Now Pay Later means that when you purchase something, you can select a payment option that allows you to take the goods straight away, but pay them off in instalments over time through a purchase plan with one of the providers. The service is usually advertised as ‘interest-free’.

However, this strategy could potentially affect your loan applications down the track. Buy Now Pay Later providers do not check your ability to pay or your credit history. If you aren’t vigilant, responsible and good at managing your money, you could incur extra charges and damage your credit score. For example:

  1. If you don’t have enough money in your account when it’s time to make repayments, you could incur an overdrawn fee from your bank.
  2. If you can’t make a repayment to the provider, you may be hit with a late fee.
  3. There may be monthly account-keeping fees and/or an extra fee for each payment.

Even if you do keep up with your repayments, using this service too frequently can send the wrong message to a lender due to the stigma that regular users often spend beyond their means. Lenders may ask more questions about your spending and ultimately choose to decline your application.

If you are using Buy Now Pay Later, you need to be very much on top of your money. If you are considering taking out a loan in the near future, you may be better off saving for the item and paying for it up-front and in-full to demonstrate good spending habits, or at least use Buy Now Pay Later sparingly.

If you are concerned about your level of expenditure or your ability to secure a home loan, please give your Smartline Adviser a call to ensure you are on the right track.



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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.