Buy Now, Pay Later: Can it affect your home loan approval?

Find out how buy now pay later works and what you need to know before you sign up.

How buy now pay later works

Buy now pay later means you pay by instalments over time, instead of paying the full amount upfront.

When you use a buy now pay later service, you can buy a product and delay payment. For smaller purchases, you usually pay it off over a few weeks. For bigger purchases, it may take several years to pay off.

You usually don’t pay interest on the purchase. Instead you’re charged fees.

Lots of shops offer different buy now pay later options. Some buy now pay later arrangements are also offered through credit card networks such as Mastercard and Visa.

Before you sign up to buy now pay later…

Before you sign up to buy now pay later, keep in mind:

It’s easier to overspend: You can over-commit to spending what you can’t afford.

Fees can add up: You may be charged fees to use the service.

Multiple services are hard to manage: If you sign up for more than one service at a time, it can be hard to keep track of payments

It might affect a future loan application:  Buy now pay later arrangements, late fees and applications for a buy now pay later arrangement might appear on your credit report. Lenders will consider this when you apply for other loans (for example, a car loan or mortgage).

Lay-by can be cheaper: Lay-by has no account-keeping or late fees.

Always check the fees you’ll pay 

Buy now pay later services are often advertised as ‘interest free’ or ‘0% interest’. But while they may not charge interest, they may charge fees. These can include:

• late fees – if you miss a payment or pay late
• monthly account-keeping fees – a fixed monthly fee
• payment processing fees – some charge an extra fee each time you make a payment
• establishment fees – some charge a fee to set up the account

You may also have to pay bank fees:

• overdrawn fees – if you don’t have enough money in your account to cover the scheduled repayment
• interest – if you are paying by credit card

Some buy now pay later arrangements must have limits or ‘caps’ on the fees they can charge. To see if there’s a fee cap, check your contract.

Buy now pay later can affect your credit rating!

Every time you apply for buy now pay later, it will trigger a credit check. A lot of credit checks on your report can influence your credit score and be a red flag for lenders.

Also, any late or missed buy now pay later payments can be reported and can reduce your credit score.

When you apply for a home loan, car loan or any other sort of loan, the lender will look at your credit score as one of the factors in deciding whether they’ll lend to you or not, and at what interest rate. Learn more about credit scores.

What to do if you get into trouble

All buy now pay later providers are required to have complaints and hardship services. Contact your provider if you have a complaint or if you’re having trouble making repayments.

See financial hardship for more practical steps to get help.

If you’re unhappy about a service or product, you can complain.

Financial counselling

Financial counsellors help you manage debts and get your finances back on track. This is a free and confidential service.

Call the National Debt Helpline on 1800 007 007. Monday to Friday, 9:30am to 4:30pm. Or live chat, Monday to Friday, 9:00am to 8:00pm.

Aboriginal and Torres Strait Islander people can call Mob Strong Debt Help on 1800 808 488. Monday to Friday, 9.30am to 4.30pm.

Debt management

Call Way Forward on 1300 045 502. Monday to Friday, 9:00am to 7:00pm. If you’re in financial hardship, they can arrange a debt repayment plan on your behalf. This is a free service.

Tips for managing buy now pay later

If you’re going to use a buy now pay later service:

1. Set a limit: Stick to a spending limit you can afford.
2. Use one service at a time: Avoid multiple buy now pay later services as they make it harder to manage your payments.
3. Budget for your payments: Include bills, loan payments and buy now pay later payments.
4. Link to your debit card: Consider linking your buy now pay later account to your debit card instead of your credit card. That way you’re using your own money and avoid credit card interest.

Buy Now, Pay Later: could it affect your home loan approval?

Buy now, pay later. Sounds convenient and harmless, right?

It’s no surprise that Buy Now, Pay Later (BNPL) services like Afterpay have surged in popularity as it lets you split purchases into smaller, interest-free instalments (as long as you pay on time).

But there’s a catch. Earlier this year, significant changes rolled out for how BNPL services are regulated. And if you’re gearing up to buy property, these updates aren’t just background noise – they could directly impact your borrowing power and your path to approval.

What were the changes?

Previously, BNPL services were able to sidestep Australia’s credit laws. Users could sign up easily, with no real checks on your financial situation and ability to pay the instalments.

As a result, there were growing concerns around the number of people overspending and getting into financial trouble.

These concerns have led to the government to step in to regulate BNPL services. From June 2025, BNPL providers in Australia became officially regulated under national credit laws.

BNPL providers must now:

• Hold an Australian Credit Licence

• Conduct affordability checks before approval

• Follow responsible lending guidelines.

Notably, missed payments can be reported to credit bureaus and will show up on your credit report, the same way a credit card default might.

How does BNPL affect home loan eligibility?

Banks look at your credit score and credit report as part of your home loan application. With mandatory credit reporting in place, missed BNPL payments can appear on your credit file.

Missed payments can signal financial risk to lenders and impact your ability to get a home loan. Even if you don’t miss BNPL payments, frequent BNPL use could raise red flags, as it may translate to you not being able to manage your finances or being under financial stress.

The bottom line is that occasional use of BNPL services is not going to annihilate your chances of home loan approval, especially if it’s used responsibly and paid on time. However, if you tend to rely on BNPL and regularly miss payments, it may end up costing you your home loan.

What should I do next?

If you’re planning a property purchase, it’s a good idea to get on the front foot and take control of your BNPL spending habits as soon as possible.

Pay off any outstanding balances, reduce your reliance on BNPL, and close any unused accounts. Where possible, reduce your BNPL credit limits, as this can improve how lenders assess your overall financial position.

Additionally, you can check your credit report to see whether your BNPL activity is listed. You can do this through:

• Equifax Australia
• Experian
• illion

Furthermore, ensure that your BNPL activity is accurately recorded and current. If you find errors, raise them directly with a credit reporting body.

Like to chat with a professional?

Understanding how spending habits affect your credit profile is essential before applying for a home loan.

When you’re ready to look at your home loan options, we’re here to guide you through the process and help you prepare a strong, confident application. Get in touch whenever you’re ready to take the next step.