Afterpay, Lay By Apps and your Home Loan

Afterpay it. Buy now, Pay later. Shop Now, Pay Later. Interest Free.

We’re seeing more and more of them come into the market and they allow you to buy now, pay later at some of Australia’s leading retailers such as Country Road, CottonOn and ToysRUs. Unlike traditional layby where you complete all of your instalment payments prior to collecting the item, providers such as Afterpay let you walk out of the shop with the item in your hot little hands – often up to the value of $1,000. You’re then required to pay your instalments over the coming weeks instead.

Sounds good, right?

It is if you manage it carefully. But be aware that mismanagement of these facilities – like any other credit facility – can have a detrimental effect on your credit rating/report. This can make it more difficult to obtain a home loan in future.

We’ve put together a snapshot of what you need to know about the top three ‘layby’ apps.

Afterpay

Afterpay allows immediate purchase of the goods or service you are buying which is then paid-off in four equal fortnightly instalments over the next eight weeks. Afterpay will assess your capability to make payments according to the Payment Schedule. This may include ordering a credit report, performing other repayment capability checks and verifying information you provide against third party databases. Afterpay reserves the right to report any negative activity on your Afterpay Account (including late payments, missed payments, defaults or chargebacks) to credit reporting agencies.

Openpay

Openpay is similar to Afterpay but allows for more expensive purchases (Afterpay is generally limited to between $1,000 – $1,500). You choose the frequency of repayments and period of time over which the purchase is to be paid off. Openpay charge a processing fee of up to $4 per purchase, there may be an establishment fee on the account and it can also attract late fees. Openpay also maycomplete a credit check on you and can disclose to a Credit Reporting Body (CRB) if you fail to meet your payment obligations.

ZipMoney and ZipPay

These two operate more like a Line of Credit with minimum monthly repayments required. ZipMoney is a Line of Credit where interest is charged only after 3 months at 19 per cent. ZipPay is a digital wallet with a line-of-credit up to $1,000 where after an initial fee-free period, if there is a balance owning on the first of each month there is a flat $5 fee, but no interest. ZipMoney will always require a credit check and ZipPay may do. Any default on payments would be reported to a relevant CRB.

These types of facility, particularly those that are interest free, aren’t generally considered a ‘debt’. They should however be disclosed during the home loan application process to ensure they are factored into your ongoing expenses, especially for Line of Credit type facilities. If you do decide to take on out, be sure to manage it closely and adhere to the repayment schedule you have been provided. Otherwise the smallest of items could land you with an unwelcome surprise when you come to purchase the biggest of items!

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