Buy Now & Pay Later - the hidden danger potentially stopping you from owning your own home

Buy now, pay later services like Afterpay, ZipPay and Certegy Ezi-Pay can work well as long as you're sure you'll have the money to make the payments.

These services generally encourage you to shop more, and buy things you wouldn't otherwise be able to afford.

Buy now, pay later services and merchants are seeing great benefits, but a lot of users end up paying late fees – which is effectively the same as interest.

When is an interest charge not an interest charge? When you call it a fee. And if it's technically not interest, you don't have to follow responsible lending rules.

The Buy Now Pay Later sector is winning-over the younger demographic with the promise of instant gratification, but with every sugar-high comes with 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 jumping from 400,000 to approximately 2 million between 2015 and 2018 with advertising posters stickered all over shopfronts.

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

In theory, it makes sense. You get the item or service and pay it off over instalments, so you’re actually putting forward your liability.

This might be ok for someone that manages their money well, if they pay off the item on time but there’s probably one per cent of people doing that and the rest of them are spending beyond their means.

As a result, there may also be a stigma associated with using Buy Now Pay Later schemes rather than paying up-front and in-full.

Utilising this ‘Buy Now Pay Later’ method may potentially send the wrong message to a bank and ultimately go against you. 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 savings and spending habits.

If you are concerned about your level of expenditure or your ability to secure a home loan, a conversation with our Finance Specialist could set you on the right

path.

Duy Tran

Finance Broker

0433 590 621