I LOVE not paying for things. Second best? Paying for things later so it feels like I didn’t actually pay for it. This is, of course, a terrible spending mentality but feelings are feelings. I know I’m not the only one or apps like Afterpay that allow you to pay later wouldn’t be so popular. But now it seems that using these apps are hurting our chances at future loan applications.
Don’t believe me? It’s happened IRL. Speaking to 9Finance, 28-year-old Amy-Louise Parsons experienced just this when applying for her own home loan.
“I had to cancel my Afterpay account and send her something saying that I’d paid it off and I closed my account. I actually had to physically cancel my account to get my mortgage. My credit file was amazing other than that. I didn’t have a credit card or anything. I was really shocked about it.”
She’s not the only one. Perth local, Lauren Lane, told Australian Financial Review she was also denied her mortgage application because of her Afterpay account.
It might not just be Afterpay and equivalent apps that will do you a disservice, banks are also taking other subscriptions such as Netflix and Uber Eats into account.
Another woman, Georgina Emanuel, told AFR too many Uber rides and Uber Eats charges were the reason she didn’t get her mortgage approved. Ummm, excuse me, what?
Is It Only Mortgages Affected?
Nope, sorry guys. Felicity Cooper, the Financial Planner and Founder of Cooper Wealth Management, explains it’ll affect all your loans, depending on your bank.
“We’re seeing all loans affected, although it does depend on the bank or financial institution themselves to some degree.”
Why Do They Affect Your Loan?
Why is this a thing, especially if you’ve always paid everything off in time? Because even though these apps are not considered credit services, that’s exactly what banks are beginning to view them as. Of course, it’s going to be even worse for you if you have any amount outstanding. Cooper says that it’s not just about debt, but about your spending habits.
“Banks are looking at a number of things – what your commitments are already, your history of debt, but also your spending patterns and how they would be affected by having debt.”
What Spending Will Have An Effect?
For those of you (me) freaking out rn and running over all the times you’ve subscribed to a service or bought something through Afterpay instead of outright and wondering just how badly you’ve screwed your life, first of all calm down. Secondly, Cooper does confirm that it’s not just Afterpay. It’ll be “anything that adds to your regular cash flow (income and expenses)“.
“It’s not the fact that your use of [things like] Uber that affects the outcome,” she says, “It’s [how much] money you spend on food and transport that does. All of these costs (regardless of how they’re paid for) will be included in your history of cash flow. It’s like people thinking that if they use PayPal the bank won’t know they spent the money. It’s still an expense.”
So no don’t freak out, just because it’s being taken into account doesn’t mean it’s necessarily a reason you’ll be denied, but it’s used as a reflection of your spending habits.
What Else Could Screw Us?
While we’re on the subject, let’s just rip off all the bandaids at once and see what shape we’re in, shall we? Because Cooper says there’s more we need to know.
“It’s really important to know that after September of this year most major banks and various credit providers are now adding extra information about the credit products you hold.“
“This new information will include the type of credit products you had in the last two years, your usual repayment amount, how often you make repayments and if you make them by the due date.”
So basically, be responsible with paying things off and close your Afterpay account before you apply for a loan, I guess.