The Buy Now Pay Later sector is winning-over the youth demographic with the promise of instant gratification. Home loan providers and mortgage industry leaders are warning that with every sugar-high comes the risk of a corresponding low.
Providers such as AfterPay and Zip Pay have experienced massive growth in popularity, with the number of Australian users now numbering in the millions.
Buy Now Pay Later providers pay the merchant on behalf of the customer. This allows the customer to obtain the goods or receive a service immediately. Subsequently, the client pays off the debt through instalments. Temptation is at its core.
But as the sector’s breakneck growth continues, younger users, in particular, should exercise caution. They could risk their chances of securing a home loan further down the track. If a lender sees frequent ‘buy now pay later’ notations on a client’s bank statements, questions may be triggered about their spending behaviours. The result might well be a declined finance application.
It is far preferable that clients save for the item and demonstrate good habits. Even using a credit card is better.