Why “Buy Now, Pay Later” Could Be Killing Your Home Deposit Goals

Why “Buy Now, Pay Later” Could Be Killing Your Home Deposit Goals

Buy Now, Pay Later (BNPL) services like Afterpay, Zip, and Klarna have exploded in popularity across Australia in the last few years.

The range of products and services offering BNPL has broadened to such an extent that you can now use it at some fast food outlets, chemists, supermarkets, for concert and sporting events tickets, on line retailers and most bricks and mortar retail stores. They’re often called “pay in 4” as well.

They’re convenient, interest-free (if you play by the rules), and they let you get your hands on what you want today – without waiting for payday.

But while they may seem like harmless tools for managing cash flow, BNPL services can quietly sabotage your goal of saving for a home deposit – and even make it harder to get a home loan down the track.

The Illusion of Interest-Free Debt

BNPL companies are smart with their marketing. “No interest!” “No hidden fees!” It sounds better than a credit card, right?

The catch? It’s not free if you fall behind. Late fees can quickly add up, especially if you’re juggling multiple BNPL accounts. Even if you always pay on time, you’re still committing to regular repayments – money that could otherwise be going straight into your home deposit savings.

Let’s say you’re paying off a $300 fashion haul in four fortnightly payments. That’s $75 every two weeks that could’ve been compounding in your savings account.

Repeat this a few times across different platforms, and suddenly your short-term splurges are costing you long-term opportunities.

The fact that BNPL can now be used on impulse decisions (I’m hungry, let’s get some takeaway) and not just bigger ticket items like furniture, a new wardrobe, an end of year holiday means that the temptation to instantly satisfy a want is more available. This is dangerous, especially to someone who doesn’t have an ingrained or learned sense of delayed gratification and/or struggles to live within their means.

BNPL Affects Your Borrowing Power

Here’s something many people don’t realise: lenders do look at your BNPL activity when assessing your home loan application.

Even though BNPL doesn’t always show up on your credit report, most lenders now ask about it during the loan application process – and they’re not fans. Regular use of BNPL can make you look financially stretched, impulsive, or reliant on short-term credit to get by. Some banks even treat BNPL limits like credit cards, applying theoretical repayments to your borrowing assessment, which can reduce the amount they’re willing to lend you.

Worse still, if you’ve ever missed a payment or racked up fees, some BNPL providers do report negative information to credit agencies. That little $150 sneaker purchase could haunt your credit score – and your shot at home ownership.

It Encourages Spending, Not Saving

When you’re trying to save for a house, every dollar counts. But BNPL is designed to make spending feel painless. Psychologically, splitting a $200 item into four payments makes it seem less significant – even though you’re still out $200. Over time, that mentality chips away at your discipline and makes it harder to build momentum in your savings.

Saving for a deposit takes sacrifice, focus, and a clear budget. BNPL chips away at all three.

Let’s Get Honest

If you’re serious about buying a home, it’s time to ditch the “buy now, pay later” mindset and embrace “save now, own sooner.”

Learn the difference between wants and needs and embrace that process. It’s ok to have wants, but it’s also ok to wait for them until you can afford them without taking on debt or using money that should go into your needs.

BNPL might seem like a smart way to manage your cash, but it can quietly drain your savings and damage your chances of getting a mortgage. Set yourself up for success by deleting the apps, cutting unnecessary spending, and funnelling that money into your deposit fund.

Your future self – and your future home – will thank you.