A social media influencer has told how she racked up more than $2,000 in debt with Afterpay after forgetting how much she had spent using the short-term lender.
TikToker Lillian Bradford shared a screenshot of her total debt with the buy, now pay later service – which left her needing to pay $2,093.17 in 60 days to avoid late fees.
‘I was fully under the impression that I only owed maybe $300 max on Afterpay,’ she said.
She said though she had more than enough saved up to pay the money back and that she doesn’t notice when the repayments are deducted from her bank account.
Referring to her video on his own feed, Perth-based mortgage broker Robert Roper said a growing number of Australians were putting their future home ownership prospects at risk by regularly putting their purchases through Afterpay.
TikToker Lillian Bradford told how she racked up more than $2,000 in debt with Afterpay despite thinking she only owed the short-term lender $300
Ms Bradford shared how she needed to pay $2,093.17 in 60 days to avoid late fees with the short-term lender
Much like a credit card, the popular lending service allows users to pay for items in installments interest-free as long as they make repayments on time.
But Mr Roper said Australians should be aware about how using the service affects their credit score and their chance of securing a home loan later in life.
‘I have been inundated with customers lately who are in this exact position,’ he said in a clip on the video-sharing website.
‘People are becoming desensitised to the amount they’re running through Afterpay rather than paying up front.
‘But what many users don’t realise is the negative impact it can have on your credit score.’
He said credit reporting agencies view Afterpay as a ‘negative credit’ because it can show the person taking out the loan is living outside their means.
Robert Roper, director of Trusted Finance in Perth, said a growing number of Australians were putting their future home ownership prospects at risk by putting their purchases through Afterpay
Mr Roper said in a TikTok video Australians should be aware how the service affects their credit score
‘Otherwise why wouldn’t you pay for something up front?’ he said.
‘If your credit score falls below 620, they [the lender] might decline you for a home loan.’
Commenters under his video said lenders had even asked them to close their accounts with buy now, pay later services before approving a home loan application.
‘They made my partner close his ZipPay and provide proof,’ one person wrote.
‘I had an AfterPay purchase active and the bank rang me and asked if I could pay it off before they submitted the documents,’ another said.
Tax agent H&R Block chief executive Brodie Dixon previously told Daily Mail Australia a bad credit score, from being in too much debt, was a surefire way to miss out on getting a home loan.
He had a message for ‘the younger demographic, especially those using credit cards and buy now, pay later services’.
‘What many young people don’t realise is that defaults on these payments may affect their credit score,’ he said.
‘This can have lasting effects on their ability to be approved for loans in the future.’
Major lenders, including the banks, rely on data from consumer credit check firms Experian and Equifax for individual credit scores to determine if someone’s daily spending habits would make them a potential borrowing risk.
Spending too much on Afterpay or credit cards can stop young people getting approval for a home loan. While interest rates are at record lows, the banks are still required to be strict when it comes to approving mortgages. Pictured is Melbourne’s Bourke Street Mall
An Afterpay spokeswoman said the service should not affect the customers’ credit score.
‘Your credit score can be impacted when somebody does a credit check on you or if you are reported as paying debts late; at Afterpay, we never do credit checks or report late payments,’ the spokeswoman said.
‘We don’t believe that missing a payment with Afterpay should result in a bad credit history – especially when the average purchase is only around $150.
‘Unfortunately, we have heard stories from our customers that some banks or mortgage brokers tell people that using Afterpay affects their ability to get a home loan, but again this isn’t true.’