What is Afterpay?
As we head rapidly into Christmas, the temptation to use AfterPay as a means of paying for goods is tempting for many. After all, its just like lay-by except you already have the goods, right? Wrong!
What is AfterPay?
AfterPay is an arrangement that allows you to buy goods now and pay them off over four interest-free instalments. Sounds great so far...
It must be – AfterPay already has over 800,000 customers and 6,000 merchants signed up.
But what do the Banks think?
2018 will herald greater scrutiny from the banking sector when it comes to verifying expenditure habits. Technology and good old human eyes will be going over bank statements to ensure that clients are not over-committed. AfterPay payments will be factored into your expenditure.
Further, with comprehensive credit reporting coming into effect from 2018 a late or missed payment on your AfterPay history has the potential to create an adverse event on your credit file.
The Westpac Group (Westpac, St George, and RAMS) have this week announced that they consider AfterPay and Zip arrangements as credit contracts and will take repayments to these providers into account as an existing liability. So, even though it is only four instalments these will be factored in to the banks’ assessment of your affordability and borrowing power. If you fall short, you would need to wait for your AfterPay facility to be finalised before the Bank will consider your finance.
And if you don’t disclose AfterPay – because it’s “not really a liability” your loan could be refused outright for non-disclosure
The Golden Rule
If you can’t afford now, don’t buy it! AfterPay can, and will, affect your borrowing power, has the potential to affect your credit rating and may affect your reputation if you don’t declare the liability.
Your RegFin broker will be happy to guide you through any credit process or loan you are considering including preplanning for borrowings. We can also direct you to any of our financial planning friends to help with budgeting.