Micro installment loan services like Afterpay and Zip-Pay have given the retail sector a breath of life. Millions of people are using these services to get what they want now and pay it off later. These services are becoming so popular and commonplace that they are viewed as a safe way to get products sooner, but are they? Are micro installment loans like Afterpay and Zip-Pay affecting your capacity to borrow when it comes time to find a cheap home loan?
Living within your means.
The biggest advantage of a service like Afterpay is the size of the repayments. These are short term loans and should be viewed as such. Used sparingly, a micro installment loan is a quick and manageable way to get what you want sooner. Having multiple loans open simultaneously can cause problems not just in the short term, but for future loan applications too.
When applying for a home loan, lenders will scrutinize your financial situation to determine how much of a risk you pose as a borrower. By analyzing your incoming and outgoing payments, a lender can form a clear picture of your finances and if you can make repayments. Having multiple microloans doesn’t look good to a lender.
Having a history of multiple microloans can affect your lender’s perception of you and as such, increase your interest rate. In the eyes of a lender, multiple loans suggest you are living beyond your means and might struggle to prioritize mortgage repayment over your other multiple debts.
Have your money and spend it too.
There is still space in a finance savvy person toolkit for micro installments loans such as Afterpay. They can provide essentials items quickly, and you generally pay zero interest on these loans. If you can’t stop After paying, make sure you keep the loan amount to no more than four. Keeping your simultaneous loans small will look better on a home loan application, and it will be easier to manage the repayments.
If you do have multiple microloans or have taken out several in the past, don’t fret, thee are still ways to make you a shoo-in when it comes time to sign the mortgage papers. Before applying for a home loan, pay off all microloans you have. Keep away from these loan services for a few months before you apply for a home loan.
While personal loans and credit card debt will increase your credit history if you pay them off on time with no defaults, Afterpay and its ilk are slightly different. There is no credit check performed when taking out a microloan, so paying it off won’t affect your credit score; however, missing payments will incur a large penalty, and Afterpay reserves the right to report negative credit to the appropriate mediators. So, microloans cant boost your credit rating but can leave a black mark if handled incorrectly.
Paying off a mortgage is a big commitment, attempting to take out a home loan while paying off debts is not advisable. Afterpay is a great way to get items you want without having to wait and handled responsibly, you pay zero interest. Missing a payment can negatively impact your credit rating, something that can be disastrous for a mortgage application.
When applying for a mortgage, the less outgoing expenses you have, the better chance your application has of being approved. Because most Afterpay transactions are limited to under $1000, it’s hard to justify their use, especially when you are much better off saving the money, and avoiding these microloans all together.
Yes, it is possible to pay off a mortgage and multiple Afterpay loans. Yes, it is possible to be approved for a mortgage with existing loans. Anything is possible, wether or not having multiple small debts at once is good for you? Well, that’s for you to decide.
