Turned down for mortgages after using buy now pay later shopping deals

Klarna could cost you a mortgage: Home buyers turned down for loans after using buy now pay later deals

Aspiring homeowners are reportedly being turned down for house loans as they have used buy now pay later deals.

Experts now urge borrowers to think twice before using the convenient checkout option from brands such as Klarna.

Mortgage adviser Sabrina Hall, of Kind Financial Services, says a client was rejected after using this type of credit. The decision was overturned.

Mortgage risk: Experts are now urging borrowers to think twice before using the convenient ‘buy now pay later’ checkout option from brands such as Klarna

She says: ‘All lenders view buy now pay later schemes differently. My client was showing many transactions on bank statements and the lender was worried they were living beyond their means.’

A 26-year-old woman also told online magazine Refinery29 she was declined for a mortgage on her first home by HSBC and Barclays due to Klarna use. 

Both banks deny they automatically reject clients who use BNPL schemes. 

A spokesperson for Klarna said: ‘This is yet another example of how the current financial system and some traditional banks fail to understand the modern consumer.  

‘Klarna’s core BNPL products do not affect your credit score and the majority of our 15 million UK customers pay us back on time because we provide a healthier and more sustainable form of credit. 

‘It is disappointing that lenders are grouping BNPL products with other forms of debt and monthly payments when considering affordability, particularly when regular, on time or early repayments demonstrate consumers are managing their finances effectively rather than becoming trapped into a revolving cycle of debt by using a credit card. 

‘We will be working with mortgage lenders and brokers to help them better understand how our products work so they can be accurately incorporated within their affordability assessments.’

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