03 Jan Are You Using AfterPay and ZipPay? Banks Apply Stricter Measures on Lending Requirements
Consumers who use AfterPay and ZipPay will now have to disclose what they owe on these transactions as part of banks’ serviceability requirements.
AfterPay and ZipPay are digital credit platforms which enable consumers to purchase goods and services and receive them immediately without paying for them upfront. The digital credit companies serve as the financiers and pay on the consumer’s/purchaser’s behalf. The purchaser will then make repayments to the financier usually in installments over a short period of time. For instance, AfterPay requires four equal fortnightly repayments. Fees and charges apply for those that fail to meet the repayment terms.
There are a number of situations in which the “buy now, pay later” is useful, including for those on a lower income who are looking for a treat but cannot afford to pay for everything in one lump sum. It has been a proven effective strategy for businesses to include this on their sales efforts to entice shoppers to purchase more. It can be hard to get the money together that you might need upfront. By buying now and paying later, you are able to get the product immediately, but with easy monthly repayments, rather than needing to find large amounts of money in advance.
The digital services can be considered convenient but critics claim they make it easier for consumers to build up debt. There are instances where consumers tend to lose track of their repayments!
Major banks such as Westpac and its divisions – Bank of Melbourne, St George Bank and BankSA – are “tightening their scrutiny of digital consumer credit by property buyers in the latest move to get a clear picture of a borrowers’ true financial position in a bid to improve borrowing standards and serviceability.”
Under Westpac’s new policy, a property loan applicant who used AfterPay and/or ZipPay has created a liability that must be included in any loan application along with the monthly repayment. Simply put, if you are applying for a property loan, you have to declare whether you have an ongoing credit with AfterPay and/or ZipPay, otherwise, your chance of getting approved is very slim.
If you intend to secure a property this New Year, double check with your trusted mortgage broker the lending requirements of your chosen bank or lender. Furthermore, as a borrower, it is also your responsibility to declare all your outstanding debts that would affect your credit rating. However, when in doubt, you can always consult your mortgage broker who will be able to help you throughout the loan application process.
Credit Representative (486927) is authorised under Australian Credit Licence 389328.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.