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Personal Loans versus Buy Now Pay Later facilities : What to compare and consider

Helpful Money Tips

With so many retailers and businesses now offering Buy Now Pay Later services, such as Afterpay and Zip Money, Australians are being exposed to these schemes on a daily basis, whether it’s promoted on a shop front window or on an online website.

So what should you know about these schemes before you use them, and could a personal loan be a better option?

Below is some important information to help you compare and decide.

Which one is easier to manage? A personal loan or buy now pay later (BNPL) schemes?

Let’s use an example to navigate this question.

If you were to borrow $1500 to spend on Christmas gifts, and spent $500 in three different shops – let’s compare your repayments using a personal loan against BNPL schemes.

OPTION 1            Borrow $1500 using a personal loan over a term of 9 months.

Repayments        $50.04 per week via direct debit.(Set and forget!)

OPTION 2            Use 3 Buy No Pay Later schemes.

First Store ($500) started on the 5th of the Month.

Second Store ($500) started on the 8th of the Month.

Third Store ($500) started on the 15th of the Month.

Repayments        Store 1: $125 on the 5th and fortnightly after (12th, 19th and 28th)

Store 2: $125 on the 8th and fortnightly after (15th, 22nd and 29th)

Store 3: $125 on the 15th and fortnightly after (22nd, 29th and 13th)

(With BNPL schemes, the first payment is made at the time of purchase, and the remaining debt is paid in 3 fortnight payments thereafter.)

The reality of buy now pay later schemes is that although they are very easy to access, the example above quickly shows how they can become difficult to manage.

In the last financial year, the Australian Securities and Investment Commission (ASIC) found one-in-six BNPL users had either become overdrawn, delayed bill payments or borrowed additional money because of a BNPL arrangement.

And knowing that Afterpay made $46 million dollars in the last financial year due to late fees, helps show how many Australians were unable to successfully manage their BNPL payments.

So although BNPL may not charge upfront interest, they certainly charge substantial late fees.

They may be an easy debt to get in to, but evidently not an easy debt to manage.

Another real danger is if a consumer accumulates a large number BNPL schemes. Suddenly their required payments could be $300 per fortnight or more, and there’s still the other ongoing bills and food they need to cover.

What else should you know about the difference in repayments?

Can you payout the facility early?


Yes. At Fair Go Finance there are no early pay out fees or charges.

At Fair Go Finance you’re welcome to payout your personal loan at any time.

And if you do this, you can save yourself interest.


Yes but it could hurt your pocket. If you are looking to get additional finance, your BNPL schemes could even prevent your application from being approved.

Read our blog, “How BNPL services can affect your chances of loan approval.”

Will my timely repayments help improve my credit score?


Yes. At Fair Go Finance we are one of the only small loan lenders who is contributing to Comprehensive Credit Reporting (CCR).

In short, this means each time you make a loan repayment on time, we update this good behaviour with the credit bureaus allowing you to actively improve your credit score.


No. BNPL is not a traditional form of credit, so making timely repayments for BNPL won’t go towards helping you build up a good credit history. On the other hand, if you miss or are late with your BNPL repayments they can update this negative behaviour on your credit report, effectively decreasing your credit score.

Which one lends responsibly?

Traditional lenders, like ourselves, charge interest as part of our loan structure. And because of this, we are regulated to make sure we meet responsible lending guidelines which is extremely important and something that Fair Go Finance takes very seriously as a responsible lender.

Because BNPL products are structured to be interest-free, they are not currently subject to the National Credit Act’s regulations.

BNPL services, therefore, are not required to meet any responsible lending obligations such as assessing someone’s suitability or affordability.

BNPL have used this loop hole to avoid regulation, allowing them to lend to people without adequate assessment, duty of care or accountability if a customer struggles to repay their facilities.

How will you decide between a personal loan and BNPL services?

After reading the above information, we hope it’s provided you with further insight into how you can compare, and what to consider, when choosing between a personal loan and Buy Now Pay Later services.

As a responsible personal loan provider, we are proud of our transparent and personalised rate loans, our loyalty rewards program, our easy-to-manage direct debit loan repayments and the ability for our customers to actively improve their credit score by making timely repayments.

So next time you’re looking to fund a purchase or expense, we hope you’ll