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Tips if you’re considering Buy Now Pay Later or short-term loan services

Buy Now Pay Later Services (BNPL) help people to pay for items by instalments. A short-term loan service (also known as payday loan), lets people borrow up to $2,000, with anywhere between 16 days and one year to pay it back.  Both types of borrowing have boomed in recent years.

No matter how you borrow it is important to have a clear plan for how you will repay the borrowed amount to avoid financial difficulties in the future.

We’ll share some tips to help you better understand BNPL and short-term loan services and outline NILS (No Interest Loan Schemes), which offers affordable repayments, with no fees or charges.

What to be aware of if you’re using or considering BNPL services

BNPL allows you to buy something now and pay for it later in instalments over a set period.  BNPL services like Afterpay, ZipPay and Klarna are offered by many shops as another payment method like a credit card, or debit card. Repayments are typically made automatically from a bank account or with the credit card used to set up the BNPL account. You don’t pay interest on the cost of the purchase, instead sometimes you’re charged fees.

Fees for BNPL could add up

Check with your own BNPL provider, to understand which of the following potential fees they charge and how much they are:

  • Account keeping fees: a fixed fee with your BNPL provider, which is usually charged on a fortnightly or monthly basis. It generally only applies if there is an outstanding balance on your BNPL service
  • Establishment fees: an upfront fixed fee that is usually paid either when you receive approval for your BNPL service or is paid over the term of using the service by a regular repayment
  • Processing fees: an administration cost, which is generally charged per repayment
  • Late repayment fees: charged for missing a repayment or repaying after the due date

Other fees that may be payable include:

  • Overdrawn fees — if you don't have enough money in your bank account to cover the BNPL repayment
  • Interest — if you are paying by credit card.

What to consider with BNPL

While BNPL services offer convenience, consider that:                                                                                                                                    

  • Convenience may make it easier to overspend – you may over-commit to purchases you can’t afford
  • Fees can add up. If you sign up for more than one service, it may be hard to keep track of who is owed what and when
  • Use of BNPL services may impact your credit score
    • When you apply for a BNPL service, there’s a chance this may be recorded as an enquiry on your credit report
    • If you make repayments on time, this could positively impact your credit score. On the other hand, if you miss repayments, this can negatively impact your credit score
  • It may be hard to meet repayments. ASIC research into BNPL services found that to meet repayments, one in six consumers had to either:
    • Become overdrawn on their bank account
    • Delay payments for other bills
    • Borrow money from family and friends.

If you do use BNPL, the Australian Security & Investments Commissions (ASIC) tips for making the most of the service are:

  • Stick to a limit and aim to have only one buy now pay later account at a time
  • Budget for bill, loan repayments and BNPL repayments
  • Consider linking your BNPL account to your debit card instead of your credit card. That way you’re using your own money and avoid credit card interest.

What to be aware of if you’re using or considering short-term loans services

A short-term loan (also known as a payday loan) is a small loan designed to be repaid within a short period. These loans are under $2,000, with terms from 16 days up to 12 months.

Lenders can only charge:

  • A one-off establishment fee (of not more than 20% of the loan amount)
  • A monthly account keeping fee (of not more than 4% of the loan amount).

Such loans can be very expensive, the borrower may incur:

  • Default fees or charges (according to ASIC, the lender can collect up to 200% of the amount loaned if the borrower misses a repayment or fail to pay back the loan)
  • Enforcement expenses (if the borrower default, these are the costs incurred by the lender going to court to recover the money owed under a credit contract).

Before taking out such loans:

  • Check the BNPL contract terms to understand your liability under the agreement and for detailed information on charges
  • Consider do you really need a loan and remember it may be expensive to borrow small amounts of money
  • Remember borrowing may not solve your money problems
  • Compare your options and look for alternatives.

No Interest Loans

The No-Interest Loans Scheme (NILS) provides people on low incomes with access to safe, fair and affordable credit. NILS, for those who are eligible, represent an alternative to short term loans or BNPL services.

To be eligible for NILS you must:

  • Have a health care care/pension card
  • Earn less than $70,000 annual income (before tax) as a single person or $100,000 annual income (before tax) if you have a partner or dependants
  • Show you have the capacity to repay the loan in the allotted time period.

With a NILS, eligible people can borrow up to $2,000 for essential goods and services with no fees, no interest, and no charges.

A NILS can be used for goods and services including the following categories:

  • Household Essentials like whitegoods and furniture
  • Car Repairs and Registration
  • Assistance devices
  • Medical & Dental expenses
  • Technology like a phone or laptop
  • Bond and moving expenses
  • Education expenses.


If you’ve been affected by a natural disaster or family or domestic violence, loans up to $3,000 are available.

Good Shepherd administers NILS in partnership with not-for-profit community organisations across Australia.  Find a NILS provider in your state or territory here.

Need help to manage your debt or understand the different types of credit available?

The National Debt Helpline can help you get back on track. Call 1800 007 007 (weekdays 9.30am to 4.30pm, Sydney time) or live chat (weekdays 9am to 8pm, Sydney time) from anywhere in Australia to talk to a free and independent financial counsellor.

Things you should know

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice.

© Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714.