Getting through the Christmas debt hangover is tough on your hip pocket today. But did you know it could also be damaging your financial future?
Aussies doubled the amount of credit they accessed through buy now pay later providers in just 12 months, according to a report from the Australian Securities and Investment Commission (ASIC) released in November last year.
One in five of those Aussies were not making their repayments. This is a bad look when you front up to your bank asking for a home loan, warns Victoria Coster, CEO of Credit Fix Solutions.
“We are finding more and more that many consumers have poor credit because they are using ZipPay and AfterPay. Most people don’t realise that they are destroying their credit reports by using these types of services, which make consumers look desperate and high-risk to the banks,” she told Your Investment Property.
Even if you already have a home loan, taking on additional debt through buy now pay later offers could affect your ability to negotiate a better deal or shop around for a cheaper interest rate.
“Now more than ever, consumers are focusing their attention on how to secure a record interest rate – and having strong credit is one of the most effective ways to do this,” Coster said.
“It is now harder to get first-tier lender approvals if you have even the tiniest blemish on a credit report.”
So while deferred payment options have a high convenience factor today, it’s important you understand the costs you could pay in the future – particularly if you want to keep your credit record in pristine condition for a home loan.