Aussies flocking to ‘buy now pay later’ layby despite debt danger

The booming popularity of "buy now pay later" layby services such as Afterpay have prompted experts to warn customers they need to be well-prepared to avoid falling into debt.

Afterpay and similar services such as ZipPay and ZipMoney allow the immediate purchase of a good or service with repayments over the following weeks.

Because Afterpay doesn't charge interest and offers short-term credit to be repaid in less than 62 days, it sneaks under the national credit code.

That means customers aren't subjected to credit checks, and the product is less regulated than traditional credit cards.

However, finance expert Sam Henderson pointed out that late payments still attracted a penalty fee.

"It comes down to good budgeting and good financial management and that's essential for everybody really, before they go out and spend money they don't necessarily have," he said.

Student and mother Madeline Kennard is feeling the consequences of her Afterpay purchases, finding herself "a couple hundred dollars" in debt to the company and without a regular income herself.

"I am worried about the repercussions of using Afterpay, about having to pay it back fortnightly," she said.

"I'm not sure where I'm going to get the money."

However, the dangers do not appear to have deterred Australians, with Afterpay proving popular in recent years.

"We've grown from less than 10 retailers and just a couple thousand customers just over two years ago, to over one million customers and over 7000 retailers," founder Nick Molnar said.

He said only 20 percent of Afterpay's revenue came from late fees, and about 80 percent came from retailers who paid to use it.

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