Any keen shopper has probably come across the buy-now-pay-later service called Afterpay.
But buyers beware – the perceived ‘smaller’ cost of instalments over several weeks – may give you a false sense of financial comfort.
Here are a few things to be mindful of before Afterpaying:
- Don’t let your impulse spending get out of control! This pay-by-instalments-option may seem manageable, but paying smaller amounts over time can lessen the impact of the TOTAL cost, and potentially influence you to spend MORE.
- Big fees – are charged if you fail to pay an instalment (for example if an automatic direct debit fails as a result of insufficient funds or an expired credit card).
- Debts and your credit rating – If you accrue a debt to Afterpay, they reserve the right to refer the outstanding amount to debt collectors and you may be reported to a credit agency if you continue failing to make payments. This could affect your future borrowing capacity for more important purchases like a property.
- When it comes time to apply for a home loan, each Afterpay account can make a big difference to your application and your borrowing capacity. More than ever before, lenders are analysing your spending habits to determine your credit worthiness and having multiply Afterpay accounts could suggest cashflow troubles or lack of savings.
So, use Afterpay with caution. Embrace it if you have too but avoid it if you can.