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Could your ‘buy now, pay later’ habit affect your chance of getting a home loan?

29 May 2020

Buying now and paying later can be convenient when it comes to clothing purchases, or an unexpected trip to the doctor. And it’s becoming more popular; the number of ‘buy now, pay later’ transactions in Australia has increased from 50,000 during April 2016 to 1.9 million in June 20181.

It’s even influencing our spending habits. More than half of the service’s users are shelling out more than they might otherwise2. However, while it might seem like an easy way to grab those new shoes now, taking on debt – no matter how small – may affect your eligibility for finance down the track.

What is buy now pay later?

‘Buy now, pay later’ is a type of payment service that allows you to defer paying for something, or do so incrementally, without having to wait to take your purchase home. It enables you to pay off your purchase over a set period of time, anywhere from a few weeks for smaller transactions to several months for pricier items.

‘Buy now, pay later’ differs to a layby purchase, which is usually kept in store until its balance is paid off. Buying now and paying later is generally available on more types of purchases as well, including health services and travel.

Before you use it, be sure to understand the terms and conditions that apply. Often, ‘buy now, pay later’ services are free of interest, but account-keeping fees, late fees and payment processing fees may still apply.

Why buying now and paying later can affect your chance of getting a home loan

Buying now and paying later, as well as digital spending on things like takeaways, rideshares and streaming services, may affect your chance of getting a home loan. Increasingly, lenders are looking at their applicant’s financial habits in more detail to understand whether they’re capable of making loan repayments. And though buy now, pay later services aren’t considered credit facilities, lenders still take them into account.

If you’re concerned about the way your spending could impact your ability to get a home loan, try Suncorp’s home loan calculator. It can offer an estimate of what you could borrow based on your expenses, potentially helping you to figure out whether you need to cut back on some of your spending.

Discover The Borrowing Limit Home Loan Calculator

How to manage your ‘buy now, pay later’ payments

In a recent review of the ‘buy now, pay later’ industry, the Australian Securities and Investments Commission (ASIC) found that most people using it purchase more expensive items than they would normally3. Of ‘buy now, pay later’ users, 1 in 64 had become overdrawn, delayed other payments or borrowed extra money to assist them with their regular costs.

If you’re at risk of overspending on ‘buy now, pay later’ purchases, you may find it useful to plan for them. Consider the full cost of the item and factor the repayments into your budget. It might also be worth using your debit accounts for ‘buy now, pay later’ transactions, too. That way you’re using money you already have and you can avoid credit card interest.


1 ASIC: ASIC puts spotlight on the rapidly growing ‘buy now, pay later’ industry

2 ASIC: ‘buy now, pay later’ infographic

3 ASIC: ASIC puts spotlight on the rapidly growing ‘buy now, pay later’ industry

4 ASIC: ‘buy now, pay later’ infographic

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Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement or Product Information Document before making any decisions about whether to acquire a product.

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