If I had a dollar for every time a someone said to me, “I wish I knew how banks viewed this debt” or “I wish I had of known more about credit score as a young adult” would be a rich woman!
Now back when we were going up in the 90s, we did not have all the options that are around now for the younger generation in relation to purchasing options. In fact, lay by was about as good as it got and even then there weren’t too many penalties attached.
But today there are so many options out there in the “buy now pay later’ world. We have afterpay, zip pay, brightePay, PayRight, Openpay, Humm, Make it mine, the list goes on and on.
One of the biggest traps that is facing the younger generation is the consequences less explored about these options. Not only the fees and charges put in place when setting up one of these accounts, how the banks view these debts, but how quickly a late payment can affect your credit rating.
Let’s put the fees and charges to bed first because this is really a no brainer – you set up an account it will cost you, you set up a lay by it doesn’t. You get changed account keeping fees and late charges, lay by you do not. You may not get the item straight away, and this may not be a bad thing, but what you could save in the long run really adds up.
So, how do banks view this kind of debt, well there is a general rule that also includes credit cards, but for every $1,000 debt you have its $10,000 they will not lend you. That is extremely significant. If you think to yourself “I only have $5,000 afterpay debt, its ok, its manageable” then you go for a home loan that is $50,000 you just were not approved for. That item you just brought, just turned into an awfully expensive item!
Your credit score, these companies are right on the ball when it comes to this. They can damage your credit score in as little as 14 days. You can go from having an excellent credit score to a good credit score just because you were a couple of days late with a repayment and did not notify them. I have seen this happen countless time and it is completely unintentionally. Just even going on a holiday and forgetting about a payment or having a bad week the week a payment is due, really simple easy to forget things that could damage your credit rating and could take years to repair.
~Novel Serialisation: Heavens Fire~
If you are thinking about using one of these services, think really hard about it and ask yourself;
Is lay by an option for me?
Do I really need it today?
What are my borrowing plans for the next couple of years?
Can I set up a schedule payment, so I am never late?
And most importantly take some advice from my grandmother, if you can’t pay cash for it and you cant afford it twice, you just cant afford it!
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