WORDS: Hayley DeJong, Proactive Finance
IMAGE: Gingerhouse Photography
Buy now, pay later services like Afterpay have taken Australia by storm, and it’s no wonder – I mean who doesn’t want to get stuff before paying for it!
But can using these payment services affect your chances of getting a loan?
Proactive Finance Director/Mortgage Consultant Hayley Dejong shares with us how buy now, pay later can impact your loan application.
If you have a family, the lead up to Christmas and 'back to school' can be a financially stressful time. Many of us get to the end of the year totally unprepared and thinking about how much it's going to hurt the back pocket.
Afterpay, and Zip Pay services allow a consumer to buy now, pay later. Fabulous! There are gifts under the tree for Christmas, the kids have school shoes and new lunch boxes.... and you don’t have to worry about paying for it for a couple of weeks.
If you are in the market to purchase a new house or maybe refinance, buy now, pay later will be viewed by the lender assessing your application.
Buy now, pay later products can affect your credit score and your credit file in general, depending on which ones you use and how you use them.
Afterpay and Zip Pay are viewed as a liability. Yep, you have signed up to a contract to make regular payments just like any other normal credit facility, even though it maybe short term.
Applying for these products also leave a mark on your credit report, so lenders will see that you have signed up for the facility when they do a credit check.
Afterpay doesn’t have a credit limit as such, so the regular fortnightly payment needs to be included as a declared living expense, which will reduce your borrowing capacity.
Zip Pay does have a limit and treated as a credit card, again reducing borrowing capacity.
If you miss payments, most buy now, pay later services have the ability to inform credit reporting companies on top of charging you late fees.
So, if you have a plan to purchase a new home or looking to borrow more on the home loan, keep in mind, although super convenient, Afterpay and Zip Pay will be viewed as an expense on your loan application.
Keep the Afterpay and Zip Pay transactions to a minimum to allow you to comfortably meet these commitments as well as new loan repayments.
Proactive Finance Group are your experts in mortgage broking, lending and asset financing. Hayley Dejong and her team represent your interests not the lenders.