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How buy now pay later services can affect your chances of loan approval

Buy now pay later (BNPL) services are on the rise in Australia.

Around 1.9 million Aussies say they’ve used services like Afterpay or Zip Pay at least once over the past 12 months, and it’s easy to see why consumers are signing up.

Effectively, rather than pay for items in one hit, BNPL schemes enable customers to pay them off over a series of interest-free installments.

Because of this interest-free structure, many customers don’t realise that BNPL facilities operate just like a loan. If they fall behind on their repayments, late fees and interest will start to take effect.

Consequently, as lending criteria continues to tighten, loan applicants are already having their applications for finance rejected as a result of using BNPL.

How BNPL affects your credit report

Customers aren’t generally required to do a credit check before opening a BNPL account and can make multiple purchases without any proof of income. This becomes a problem when users purchase more items than they can afford to repay.

Current statistics indicate one in six BNPL customers have ended up in financial strife as a result of the payment service. Once an instalment is overdue, fees and interest will quickly start to take effect. This can escalate dramatically for customers with multiple purchases on the go.

BNPL services can then report this bad financial behaviour to credit agencies. If they choose to do so, it will appear as a negative listing on your credit file and will drag your credit score down.

Can it affect you if repayments are met on time?

Even if you make all your repayments on time and have a squeaky clean record, BNPL customers still risk having their finance application rejected. As explained earlier, lenders will classify BNPL transactions as ongoing monthly expenses, and these will need to be factored in for loan servicing purposes.

So even if you are meeting your repayments on time, any outstanding purchases can be classified as a credit liability.

What is the safest option?

If you’re planning on applying for finance in the near future, such as a personal loan or mortgage, it can be worth reducing your BNPL purchases or cutting them out altogether.

If you do use BNPL services, make sure to do so wisely, and  keep in mind the potential impact they can have on your ability to get a loan.

Written by Bessie Hassan – a money expert at Finder

Are you eligible to apply?

  • I’m 18 years or older
  • I’m employed (not self-employed)
  • I’m paid $500 or more a week into my bank account
  • My income is not solely from Centrelink
  • I’ve not entered into bankruptcy or part 9 agreement within the last 12 months


It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:
For more information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.

Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan.
If you are on government benefits, ask if you can receive an advance from Centrelink.

The Australian Government’s MoneySmart Website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.