BNPL Activity Now Weighed in Personal Loan Decisions

As Buy Now Pay Later (BNPL) behavior is now formally included in credit evaluations, the Australian personal loan application procedure has experienced a significant change. A new era of responsibility and openness for borrowers has been ushered in by recent legislative changes that have altered how lenders assess financial behavior.

BNPL services are now regarded in the same category as conventional credit products like credit cards and personal loans as a result of the June 2025 revisions to the National Consumer Credit Protection Act.

This implies that the eligibility for personal loans is greatly impacted by the direct consideration of several BNPL accounts and payback records in lending choices. Only 18% of BNPL customers were apparently aware of the new rules before their implementation, which has caught many Australians off guard

.

Sweeping Regulatory Framework Reshapes Credit Assessment

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 introduced comprehensive oversight of BNPL providers. Afterpay, Zip, Klarna and similar services now fall under strict regulation. These providers must hold Australian credit licences and maintain membership with the Australian Financial Complaints Authority.

The legislation mandates affordability

assessments for purchases exceeding $2,000. Providers must verify consumers' capacity to meet repayments. Even smaller transactions now require financial assessment. This marks a significant departure from the previous unregulated environment.

ASIC data indicates one in five BNPL users struggle to make repayments. This consumer protection imperative drove the reforms forward. The regulatory body released detailed guidance through Regulatory Guide 281 and Information Sheet 285. These resources help providers meet compliance obligations by the June 10, 2025 deadline.

Research from Experian and Afterpay reveals 62% of BNPL users feel more confident with sectoral regulation. However, awareness of specific changes remains limited. This knowledge gap creates challenges for consumers navigating the personal loan application process. Lenders now integrate BNPL assessment into standard credit evaluations.

How BNPL Usage Affects Loan Approval

Financial institutions examine four critical factors when evaluating applications that include BNPL activity.

Repayment History Analysis

Late or missed BNPL payments are now reported to credit bureaus. These create permanent records that mirror credit card default reporting. The proportion of Australians incurring BNPL late fees has escalated dramatically. It rose from 5% in 2020 to 20% in 2024 according to industry surveys. This trend directly impacts credit scores and loan approval rates.

Outstanding Debt Calculations

Lenders aggregate BNPL balances across all providers when calculating debt serviceability. A borrower with $500 outstanding on Afterpay carries ongoing credit commitments. Add $800 on Zip and $1,200 on Klarna for a total of $2,500. These commitments reduce available borrowing capacity for personal loans.

Credit Report Enquiries

Every BNPL application generates a credit enquiry on consumer files. Multiple enquiries within short timeframes can indicate financial stress. Prospective lenders may decline applications or offer unfavourable lending terms as a result.

Financial Management Indicators

Heavy reliance on multiple BNPL services raises questions about cash flow management. It also highlights potential budgeting challenges. Lenders interpret extensive BNPL usage as warning signals even when payment histories remain unblemished.

Industry reports confirm lenders frequently require BNPL account closures as loan approval conditions. Some borrowers experience reduced loan amounts directly attributable to BNPL activity patterns. Others face elevated interest rates.

Credit Scoring Under Comprehensive Reporting

Comprehensive Credit Reporting has transformed how BNPL activity influences credit assessments. Credit bureaus now receive both positive and negative payment information from BNPL providers. This creates more nuanced credit profiles.

Experian analysis reveals Afterpay customers maintain an average credit score of 743. This compares to credit card applicants at 771. Personal loan applicants average 646. These figures challenge prevailing assumptions about BNPL user risk profiles.

However, the 20% of users incurring late fees now carry payment failures on permanent credit records. Maintaining pristine BNPL payment records has become essential for borrowers seeking loans through traditional lenders or alternative providers like CashPal.

Australia leads global BNPL adoption with 30.1% of internet users utilising these services. This represents the highest rate worldwide. The widespread usage means regulatory changes affect millions of potential loan applicants across the country.

Strategic Preparation for Loan Applications

Borrowers planning personal loan applications should implement structured preparation strategies ahead of formal submissions.

Credit File Auditing

Accessing free credit reports through Equifax enables borrowers to identify inaccuracies. Experian and illion also provide this service. Reviewing files before lenders do helps address errors early. Particular attention should focus on BNPL account listings and payment histories.

BNPL Portfolio Assessment

Comprehensive reviews of all BNPL services used within the past two years reveal the full scope of credit commitments. Dormant accounts represent potential liabilities in lender assessments even with zero balances.

Account Consolidation

Closing unused BNPL accounts demonstrates financial discipline. It also reduces apparent credit exposure. Industry analysis suggests limiting active BNPL services to one or two platforms. This approach optimises loan approval prospects.

Balance Reduction Strategies

Reducing BNPL balances below 30% of available limits strengthens debt-to-income ratios. Eliminating balances entirely proves even more beneficial. This metric carries significant weight in personal loan application assessments across major lenders and alternative providers including CashPal.

Support Resources and Alternative Options

Borrowers facing loan application challenges due to BNPL activity can access comprehensive support services. The National Debt Helpline (1800 007 007) provides confidential financial counselling at no cost. CreditSmart offers specialised BNPL education resources.

Alternative lending pathways include:

• Secured personal loans using assets as collateral
• Credit union products with flexible assessment criteria
• Reduced loan amounts meeting modified approval thresholds
• Guarantor arrangements with creditworthy co-signers

The Australian Financial Complaints Authority investigates disputes regarding unfair credit assessments. It also handles financial hardship circumstances. Fewer than one in three BNPL users understand credit score determinants. These educational and advocacy resources fill critical knowledge gaps.

Industry Evolution and Future Developments

The June 2025 regulatory implementation represents an initial phase in ongoing sectoral transformation. ASIC continues monitoring compliance and consumer outcomes. Further regulatory refinement is anticipated as the market adapts to the new framework.

Emerging trends include real-time payment reporting and enhanced credit scoring algorithms. These incorporate BNPL data more thoroughly. Deeper integration between BNPL providers and traditional credit reporting infrastructure is underway. Financial institutions are refining loan assessment methodologies to account for nuanced BNPL usage patterns.

Research indicates 79% of BNPL users consider building a positive credit history important. This suggests consumer receptiveness to responsible credit management practices. The attitudinal shift supports regulatory objectives of consumer protection while maintaining BNPL service accessibility.

The United Kingdom is implementing similar regulatory frameworks. BNPL products are expected to enter full regulation by mid-2026. This international trend toward BNPL oversight indicates sustained regulatory focus on consumer credit protection globally.

Practical Implementation for Borrowers

Australian consumers applying for personal loans must now treat Buy Now Pay Later accounts as formal credit obligations. This means incorporating BNPL liabilities into budgeting and limiting the number of active providers. Ensuring repayment reliability has become non-negotiable.

Immediate actions include reviewing all BNPL accounts and closing inactive facilities. Enabling automatic payments helps avoid defaults. Quarterly credit report checks are recommended to spot inaccuracies or unexpected entries early.

Loan applicants should demonstrate transparency about BNPL usage. Presenting evidence of responsible management proves more effective than attempting to obscure activity. Lenders now weigh this behaviour as part of overall creditworthiness assessment.

With 29% of BNPL users reportedly missing other bills to cover instalments, regulatory changes aim to protect consumers. The reforms maintain access to credit while encouraging sustainable borrowing habits. Borrowers who adapt their practices and demonstrate strategic BNPL oversight will be better positioned for approval under Australia's updated loan assessment standards.