Does Buy Now, Pay Later Affect Home Loan Approval?

Buy Now, Pay Later (BNPL) has quickly become a popular way for Australians to manage purchases, offering the convenience of instalments without upfront costs. But as BNPL becomes more embedded in everyday spending, it’s also drawing closer scrutiny from lenders and credit agencies.

If you’re planning to apply for a home loan, your BNPL activity could play a bigger role than you realise. From how it’s reported on your credit file to how banks assess your repayment history, BNPL can influence both your borrowing power and your loan approval outcome.

Let’s take a look at what buy now, pay later is, how the 2025 regulatory changes affect you and how it can affect your chances of home loan approval.

What Is Buy Now, Pay Later?

BNPL is a payment option that allows consumers to purchase goods or services immediately and pay for them over time through instalments. These services often offer interest-free repayment periods, making them an attractive alternative to traditional credit cards.

BNPL Now Regulated Under The National Credit Act

Effective 10 June 2025, BNPL services are regulated under the National Consumer Credit Protection Act 2009. This change, introduced by the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024, classifies BNPL contracts as “low-cost credit contracts”. Consequently, BNPL providers are now required to:

• Hold an Australian Credit Licence
• Comply with responsible lending obligations, including conducting credit and affordability checks.
• Be members of the Australian Financial Complaints Authority (AFCA)

These measures aim to enhance consumer protections and align BNPL services more closely with traditional credit products.

Comparison Of Major BNPL Providers In Australia

When Should I Use Buy Now, Pay Later Services?

BNPL services can be beneficial in the following scenarios:

• You prefer not to use a credit-card or want to avoid accumulating a large credit card balance.
• You need to secure a high-demand product before it sells out.
• You’re taking advantage of seasonal sales and discounts.
• You wish to spread the cost of a purchase to manage your cashflow better.
• You’re confident in your ability to track purchases and make repayments on time.

What Is The Difference Between A Credit Card And BNPL?

Does Buy Now, Pay Later Affect Home Loan Approval?

Yes, it can affect your chances of home loan approval.

• It can affect your credit score.
• BNPL accounts are treated as liabilities, potentially reducing your borrowing capacity.
• Missed payments can signal to banks that you’re not great at managing your finances.
• Frequent BNPL usage may indicate reliance on credit for everyday expenses.

If your spending on BNPL is left unchecked, you could spiral into debt, incur negative listings on your credit file, and damage your credit score.

If you’re too reliant on buy now, pay later to make purchases, then it can also be an indication that you’re having financial hardship.

Can BNPL Affect Credit Score?

Yes, BNPL services can impact your credit score.

As of June10, 2025, BNPL providers in Australia must report credit applications and defaults to credit bureaus, such as Equifax. Here’s how they can affect your credit score:

• Soft or hard credit checks may be performed when you apply. While soft checks don’t affect your score, hard enquiries can appear on your credit file and may reduce your score temporarily.
• If you miss or default on repayments, this can be reported as a default, which will hurt your credit score and remain on your file for up to five years.
• High or frequent use of BNPL services may signal financial stress to lenders, especially if multiple BNPL accounts are active or if repayments are consistently large.
• If you’ve linked your BNPL account to a credit card and miss a payment, you may incur interest charges on the card and risk harming your credit score further.

While making BNPL repayments on time won’t necessarily improve your credit score, poor management or defaults can seriously harm your credit profile, especially when applying for a home loan or personal loan.

How Does Buy Now, Pay Later Affect Borrowing Power?

Banks scrutinise your living expenses and financial obligations to assess your borrowing power.

BNPL payments are automatically deducted from your bank account, credit/debit card and will leave a footprint on your bank statement. This is visible to lenders when you apply for a home loan.

The lender will look at your expenses and income to work out how much you can borrow.
BNPL services can reduce your borrowing power due to:

• Increased Liabilities: BNPL accounts add to your overall debt obligations.
• Repayment Commitments: Regular instalments reduce disposable income, affecting serviceability calculations.
• Credit Assessment: Lenders may view extensive BNPL usage as a risk factor.

Not all purchases made with BNPL services are of concern to banks. If you’ve fully paid off the balance of the account, it does not present any risk to your mortgage approval.

If you’re using these services, you will need to disclose them as the bank or mortgage broker will find out about it when they take a deeper look at your bank statements. Be upfront about it, especially if you’ve been diligent with your payments.

How Can I Improve My Chances Of Home Loan Approval?

To reiterate, using a buy now, pay later account does not mean you’re home loan application will be declined.

If appropriately used, it can be a budgeting tool to keep your expenses in order.

Here are some tips on how you use buy now, pay later responsibly and improve your chances of home loan approval:

• Do not use multiple accounts, as it can be difficult to track how much you’ve spent on each platform and budget repayments.
• Plan to make sure you have the funds to make payments on time. Set a realistic budget and stick to it.
• Do not link your account to a credit card. A credit card can lead to further debt and incur interest. If you use a debit card, you’re using your own money to pay instalments.
• Set reminders to check there are sufficient funds available when instalments are due. The instalments are automatically deducted from your nominated account. If you have sufficient funds, you avoid late fees.
• Read the fine print. Some companies perform a credit check, and some even report defaults to credit agencies.
• Try not to use these services if you have pressing debts and commitments to pay. You do not want to add more debt when you’re applying for a home loan.
• Try to reduce commitments and make early repayments if you can afford them.
• Do not use BNPL to purchase items and services you can’t afford.
• Tell your bank that you’re using buy now, pay later when applying for a home loan. You will be asked about it to ensure you have a good grasp of your finances, and the banks like to avoid surprises when they do a credit check.
• Monitor your credit file regularly using a service like Equifax or Illion. BNPL activity is now reported and visible to lenders.

The bottom line: At times when it’s harder to qualify for a home loan, it’s best to be vigilant about your expenses.

At Home Loan Experts, we can provide you with a free credit report to check if your buy now, pay later purchases could affect your chances of mortgage approval.

Our mortgage brokers will help weed out unnecessary debts and expenses to improve your chances of getting a home loan approved.

Call us on 1300 889 743 or enquire online for a free, no-obligation assessment.