The ‘buy now pay later’ sector is winning-over the youth demographic with the promise of instant gratification, but mortgage brokers are warning that with every sugar-high comes the risk of a corresponding low.
‘Buy now pay later’ providers such as AfterPay and Zip Pay have experienced massive growth in popularity, with over 1.5 million Australians using the ‘buy now pay later’ digital payments.
A simple proposition: the ‘buy now pay later’ provider pays the merchant on behalf of the customer, then the customer obtains the goods or service immediately. The customer then pays off the debt, generally through four instalments. ‘Buy now pay later’ presents a tempting offering.
But as the sector’s breakneck growth continues, mortgage professionals are warning users, particularly in the younger demographic, to be cautious of overdoing it as this could risk their chances of securing a home loan further down the track.
Using 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.
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. Saving for items can demonstrate good spending habits.
If you are concerned about your level of expenditure or your ability to secure a home loan, a conversation with a Resolve mortgage broker could set you on the right path.