If you are an active online shopper, you will have undoubtedly seen the introduction of ‘Buy now Pay Later’ platforms such as AfterPay and Zip Pay. During the period of 2015 and 2018, such providers saw a steep growth of interest with the number of users increasing from 400,000 in 2015 to 2 million in 2018!
If you are a looking to purchase your first home, the ‘Buy Now, Pay Later’, instant gratification shopping, will come at a cost, potentially that of buying your first home.
If you are a shopper that has not tried the ‘Buy Now, Pay Later’ experience, it is a system that allows the consumer to buy an item of clothing, for example, even if you do not have the cash in the bank. The provider, such as Zip Pay or Afterpay, will pay the merchant on behalf of the consumer, allowing the consumer to receive their new item of clothing immediately. As the consumer, you are then required to pay off the debt to the provider in a number of instalments.
Shoppers be warned!! This particular method of shopping could risk your ability to buy your first home. How? Well If you manage your money well, and pay off the item in time, then it won’t be a problem. There is, however, a percentage of the community who do not manage their money well and spend beyond their means, therefore potentially not paying their clothing item off and going into further debt. For lenders, it does not provide good evidence of spending habits. With a change in lending procedures, lenders will review very carefully your bank statements. Multiple ‘Buy Now, Pay Later’ transactions in your bank statements, will make the lender question your spending habits.
The answer to this problem? Spend within your needs, Buy Now, Pay Now…..this will show the lender better spending and saving habits. You can show the bank that you can save and afford to service a mortgage when the time comes!