Is Afterpay the new Heroin?

By August 19, 2020Credit Score, Loan
Untitled design

Have you ever thought that own now pay later platforms are too good to be true? In the eyes of a finance broker, you’d be correct. Some might even compare an individual’s dependence on them to drug use.

You might be thinking that comparing debt to drug addiction is a bit of an overreaction, but in truth, the thrill we get from owning products now and paying later can be considered a form of addiction within itself, digging us deeper and deeper into debt.

In the early 1990s, due to minimal funding, drug law enforcement in Australia was less strict than it is now. This made it easier for heroin suppliers to accomplish large scale imports into the country. An increase in these imports then led to an increase of street-based illicit drug markets. The purity of this heroin and its decreased price justified its use and had many citizens utilising the drug, sound familiar?

As you would expect with any drug use, over time the increased funding of the Australian Federal Police and the Australian Customs Service made the risks of importation and use greater. With this monitoring and stricter rules in place, the impact of heroin on drug-induced seizures declined. You could even say that the growth in regulation saved us from ourselves.

Financial debt burdens 

Now imagine you’ve been relying on own now pay later platforms such as Afterpay as a way to pay for clothing, technology and anything else your heart desires. You dig yourself deeper into the hole of debt, telling yourself that fortnightly payments are nothing, until you’ve racked up quite the frightening debt and negative credit rating.

With no regulation and an extremely easy signup and approval process, almost anyone can utilise the apparent convenience of this service and while AfterPay is potentially the most common form of this payment it is simply one of many options to choose from. If one platform declines you it is almost guaranteed another will approve you for credit in its place.

As it becomes easier to accrue financial debt, the results can take a massive toll on a person’s mental health. The ease of these platforms if abused can become a slippery slope. Research into the correlation between mental health and debt has concluded that people with personal debt are three times more likely to have impacted mental health than those without debt. 

Not only can these forms of payment affect you mentally, but the negative spending habits that their use supports also creates poor financial modelling for life. Overusing own now pay later resources can lower your chances of obtaining larger business, home or personal loans while also affecting your credit score long term. The repayments are also factored into your borrowing ability as “ongoing”, meaning even if you only have six weeks of repayments left, the lender may consider the debt symbolic of your spending behaviour and decide to include those repayments as if they were ongoing debt limits!

If you’re looking to undertake any type of loan, it is best to visit an experienced professional to discuss your needs and capability for paying it back while maintaining a comfortable living situation. SFE Loans are mentors and matchmakers, connecting customers with sound advice and expert insight. Our SFE Loans team will listen to you and act as your support during the loan application process. Most importantly, we’ll empower you to understand and command your own financial future so you don’t find yourself drowning in repayments.