The buy now, pay later revolution is changing the way Australians are shopping.
However, just because it is popular doesn’t mean you should use it.
Let’s take a look at what buy now, pay later is and how it can affect your chances of home loan approval.
What is buy now, pay later?
Buy now, pay later or BNPL is an arrangement that allows you to purchase or order a product immediately while you make payments over a specified time.
The main selling point; there is no interest charged on any purchases made.
What BNPL companies are in Australia?
Buy now, pay later in Australia | Credit limit | Repayment schedule | Late fees |
---|---|---|---|
Afterpay | Up to $2,000 | Four equal fortnightly instalments | Late fees of $10 and $7 more if not paid within a week. Late fees are capped at $68 or 25% of the purchase price (whichever is lower) |
ZipPay | Between $300 and $1,000 | You can pay instalments with a weekly, fortnightly or monthly schedule | $5 late fees |
Humm | Up to $30,000 | For little things (purchases below $2,000, five OR 10 monthly payments) For big things (purchases up to $30,000, 60 monthly payment plan) |
A late fee of $6 for each missed payment. |
Bundll | Up to $4,000 | 12 weeks | $10 late fees |
Openpay | Up to $17,000 | Flexible repayment plans (depends on the size of purchase), choose between weekly, fortnightly or monthly | $9.50 late fees |
Klarna | The minimum is $10 and the maximum is $2000 | Four equal fortnightly instalments | Any late repayments on purchases below $50 do not incur a late fee. For purchases $50 and above, the fee is capped at $3 per instalment missed. The maximum additional cost a customer could pay per order is $9. |
When should I use buy now, pay later services?
- If you don’t have a credit card or don’t want a large balance on your credit card.
- If you need to pay for a high-demand product before it sells out.
- If there are seasonal sales and discounts.
- If you face or anticipate financial hardship and need to spread the purchase cost, it doesn’t burn a hole in your savings.
- If you are careful and can keep track of purchases made and make repayments on time when due.
Buy now, pay later vs credit card: what’s the difference?
Point of difference | BNPL | Credit card |
---|---|---|
Credit enquiry | Some companies perform a soft credit enquiry, but this not affect the credit score | A hard credit enquiry affects your credit score |
Regulation | It is not regulated under the National Consumer Credit Protection Act 2009. | It is regulated under the National Consumer Credit Protection Act 2009. |
Application process | Fast and easy, as there is no credit check. Once you’re approved, you can start purchasing right away. |
It takes time, as a credit check is performed. Once approved, you have to wait for the credit card to arrive before you start using it. |
Credit limit | Most offer a set credit limit of around $2,000, and the maximum can go up to $30,000. | Most offer a set limit of between $1,000 and$100,000. |
Repayment | You can spread the cost of the purchase in smaller instalments without paying interest. | You have to pay for your purchase at once when it’s due. |
Building credit | It does not increase your credit score or help to build credit. | Helps to build credit and improve credit score if repayments are on time |
Bank assessment | Listed as living expenses or ongoing liability and can reduce your borrowing power | The full credit-card limit is assessed and can reduce borrowing power. |