Can Afterpay effect my ability to borrow?
Before 2018 few people know about the behemoth company known as Afterpay. And in 2018 it took Australia by storm.
The company founded by Nicolas Molnar in 2015 gives people the opportunity to take home now, and purchase later without any interest. This service is available as another type of finance without the traditional credit, upfront fees, or interest.
Someone might wonder how the company might be able to make any money if they allow people to purchase items and does not make any money from interest.
The answer to this question is that some customers will not have all of the funds required at the time of the repayments to Afterpay. This then can affect the individuals credit score. Credit scores are what banks and institutions review when they make a decision on if they want to give you the funds for a personal loan, home loan or things like credit cards. Having a bad credit profile can restrict your options when it comes to time to borrow funds.
So is Afterpay right for you? According to data from Westpac, Macquarie bank, and other institutions, some home loan applicants are being rejected for loans due to the fact that they have outstanding debts with Afterpay.1 Since credit teams evaluate spending to get an understanding of serviceability, or the ability for a borrow to repay the loan. Banks and institutions are wary on if they want to take that extra risk on lending funds to someone to make bigger purchases.
So potential home buyers or people looking to make another big purchase that might need financing should carefully consider if they want to use a service like Afterpay to buy now and pay later. Or if they can hold off on the purchase until they can finance it with their money up front or keep up to date with monthly payments with credit cards.
Here at GTM finance we specialize in evaluating and considering all options for client’s cash flow and purchasing and borrowing circumstances. Get in touch with us today to see how we can help make the best decisions for you.
1https://www.afr.com/real-estate/uber-eats-afterpay-and-netflix-accounts-could-hurt-your-home-loan-application-20181128-h18ghz
