The recent rise of buy now pay later services such as Afterpay have changed the way in which consumers purchase a product or service. If you are one of the million customers using Afterpay, you may find yourself splurging on un-necessary handbags, holidays or haircare products to list a few. Whilst these buy now pay later services are changing the way in which customers shop, they may not be suitable for people in debt. In such cases, a personal loan may be more ideal.

What is Afterpay?

The concept is simple. You immediately purchase a product or pay for a service from a partnering retailer; either in-store or online. The payment is made later. You will, however, need to create an account with Afterpay, set up equal fortnightly payments via a credit card or debit card; and pay off the purchase; interest-free. I know; this seems too good to be true, especially if you are good at budgeting.

But, what if you are not in control of your finances?

Do you have a bad credit score?

Are you an impulse shopper?

If this sounds like you, a buy now pay later service may actually put you in more debt. If you miss a payment then you will be charged a late fee, and if you continue to miss payments, Afterpay can legally report you to a credit reporting body. So, if you are not in control of your finances and in need of money consider a personal loan.

What is a personal loan?

A personal loan is a fairly straightforward financial loan type. Put simply, a personal loan involves borrowing money from a financial institution such as a bank, credit union or alternative lender. As part of the agreement, you repay the debt in equal payments over an agreed term. You can also make extra repayments which will shorten the life span of the loan.

Use a personal loan for.

Let’s take a look at a few situations where it may be worthwhile considering a personal loan before Afterpay.

Debt Consolidation

If you’re stuck paying multiple credit cards, and your debt is spiraling out of control; a personal loan for debt consolidation may be a useful option. Adding another avenue of debt via Afterpay will only put you in a more complicated financial state; especially if you are struggling to manage all your existing debt.

A personal loan can help you consolidate your debt into one neat and tidy package. Rather than paying multiple credit cards at different rates; merge your debt into one monthly repayment. The interest rate on the loan may also be lower than the percentage rates on your credit cards. In the long run, you will save more money and develop better money habits.

Emergency expenses

Life is full of unexpected surprises. Medical bills, a new car or home renovation can be expensive; especially if you are not planning for them. A personal loan can help get you over the line; especially in these circumstances.

Building a strong credit score

Establishing a good credit score is an important part of securing finance. One day you may decide that you want to buy an investment property, a new car or even a lengthy holiday. If you don’t have the cash to outlay 100% of the purchase, you will need a loan. This is where a good credit score kicks into action. Lenders will look at your credit score when deciding on whether or not to give you a loan. A good credit score will give you the best possible chance of getting approved.

Buy now pay later services such as Afterpay reserve the right to check your credit score, but they don’t consider it when you sign up to their service. If however, you miss multiple payments, they hold the right to report you to a credit reporting body such as Equifax. This may lead to a default on your profile which in turn may drag your credit score down. Learn how Afterpay can affect your credit score.

A personal loan, on the other hand, can help you secure a loan and show lenders that you are a responsible borrower. If you pay out your personal loan, it will add positive history to your credit file. This will reflect well on your credit report and can help improve your credit score. Lenders will, therefore, be able to access your credit report and see that you were proactive in managing your personal loan.

Finance an expensive purchase

Are you planning on a getting married? Do you want to relax on the soft white sand of the Maldives? Whilst travel companies are partnering with Afterpay, a personal loan may be a more suitable option. With large purchases, you may struggle to meet the equal repayment terms set forth by Afterpay. With a personal loan, you can make more flexible repayments over a longer time period. This will ensure that you can comfortably pay back your loan without having to worry about the large upcoming repayments. If you can afford to repay them back quickly – even better!

Bad credit personal loan

Are you one of the thousands of Australians with bad credit? If so don’t worry, there are plenty of options available. Afterpay may seem like the most obvious way of purchasing a product or using a service, but it can actually put you in a worse-off state. Rather than compiling more debt; consider a bad credit personal loan. At bad credit loans, we understand that not everyone has a perfect credit score. This should not stop you from being able to enjoy your life. If you have bad credit, then consider a bad credit personal loan.

Find out more.

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