Have you been swept into the ‘Buy Now Pay Later’ torando?
You may have heard of AfterPay and Zip Pay, some of the leading providers of ‘Buy Now Pay Later’. In recent years they have had a massive growth in popularity, particularly winning-over the youth demographic with the promise of instant gratification. As leading mortgage brokers, we recommend understanding that with every sugar-high comes the risk of a corresponding low.
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, we suggest being cautious of overdoing it as this could risk effecting the users’ chances of securing a home loan further down the track.
Cullen Haynes, one of our leading brokers notes “This might be ok for someone that manages their money well, if they pay off the item on time and use their mortgage offset account correctly. 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 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.
Cullen suggests “It’s important to appropriately manage your expenses well in advance of applying for a home loan, that way you can show the bank that you can save and afford to service a mortgage when the time comes”.
If you are concerned about your level of expenditure or your ability to secure a home loan, a conversation with a Legal Home Loans broker could set you on the right path.