Just don’t do buy now-pay later

From News.com.au:

“Finance experts have warned house hunters to “stay away” from buy now, pay later platforms such as Afterpay, with spending habits viewed as a hurdle for home loan applications.

“Definitely try and avoid it,” Pink Finance founder and mortgage broker Nicole Cannon told news.com.au. “It’s something I do have frequent conversations with my clients about.

“For the consumer, Afterpay and Zip may seem great from a cashflow perspective because they can pay off their items over a period of time, but most people don’t realise credit inquiry is listed on their credit file.

“So they’ve already got listed a $1000 or $2000 credit limit which the banks have to assume is maxed out which can reduce your borrowing capacity.”


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    Why it matters

    We see it weekly. Clients with one or multiple afterpay, zippay, zipmoney accounts. It’s convenient. And the buy now-pay later providers have done a great job marketing themselves as just that, convenient.

    But there is the impact when you need a car loan or home loan. The banks will ask for statements and check conduct. Statements are hard to find and that will cause delays. If you have let a payment slip it will cost you a lot more… Your application might get declined.

    Think about it. You are asking a bank for money (if it is a home loan, a lot of money). Then when they ask you how you have handled loans in the past you show them a track record less than perfect (because, you know, it was only one payment and only $80….). The bank however sees that you have not been able to manage your small debts properly, why would they trust you with a big financial commitment….