I like how they have Afterpay and Paypal where you pay in 4 over a 40 day period roughtly, I was just wondering if there be anything like this now or in the future where you could pay someone via paypal family or friends or pay id/bank deposit but do something similar and break up the payments over a period of time. I understand this could hurt my credit limits etc but something like this could make things flexible. Thank you
Paying People Direct via Instalments but Not a Business
cr12330 on 03/10/2021 - 12:08
Last edited 03/10/2021 - 14:07 by 1 other user
Last edited 03/10/2021 - 14:07 by 1 other user
Comments
Like a private person?
yes
So how will the financial institution recover the money if you stop paying?
IMHO this will not happen.
Link it via a credit card similar what after pay does for payment only (Non prepaid credit cards to be approved on be listed on that can be use to recover funds)
family or friends
Scheduled recurring payment (with a cap) using your internet banking?
Eg. For $40
Schedule a weekly payment of $10 for 4 weeks.Looking like a lump sum, like pay that private person $100 instantly but than paying the bank $25 dollars x 4 over 40 days
Afterpay and Paypal take a cut of the transaction that the merchant absorbs. For straight cash it'd be substantially cheaper to do a cash advance on a credit card.
Sounds like you are looking for a creditor to take on the risk…
Pay for your groceries ($100) with a credit card, send the person $100, pay back your groceries to your credit card
AfterPay charge 'low risk' merchants around 6%. So what actually happens when you pay $25 x 4 is the merchant only gets $94. The merchant agrees to do this because they're making more sales than they would if they didn't offer that payment option, so it comes out of their profit margin.
It's really unlikely most payment companies would offer that sort of service, especially at that rate, to riskier 'merchants', in the risky accomodation sector credit card charges to accept payments of 10-15% are not unheard of.
Even at 6%, with < 2 months to pay it back before you have to pay extra fees Afterpay etc is charging an effective 36% P.A. interest rate. 6% up front over 40 days is an effective interest rate of about 55%.
TLDR; even a cash advance on a credit card is going to be cheaper, much less cheaper options like a personal loan for larger amounts.
There's a reason Afterpay's share price took off, it's not because they're offering a service that benefits consumers, it's because they're more effective at extracting money from consumers than credit card companies, and thus charge both the merchant (and effectively via the increased margins required, the consumer) more.
If a private person receiving your repayment in 4 installment agrees with you, it doesn't involve financial institution, so won't hurt credit limit. However, it is like not paying back your friends, the private person is unprotected.
Moving to your idea of a middle person to allow you to pay that person in 4 installment, and give the private person some protection? I think that product already exists. Personal loan is one, peer lending is another. The private person gets the whole lump sum and you pay the bank/lender in 4 installments (with interests). You miss repayment, they come after you.
You may then think hold on, with after pay, if I pay my installments on time, I don't pay interest. Sure, but with after pay model, the receiver is asked to take a discount of your payment, effectively covering the interest.
So in the end, to have "something like this could make things flexible", who pays for it?
Cash advance on a credit card? Then repay credit card balance.
Beemit.com.au App might fit the Bill…
See https://www.beemit.com.au/faq?topic=360005725674 for Scheduling or recurring
This is exactly what scheduled payments on your online banking are for, if you're both expecting to accept the small payment increments over time and NOT in a lump sum.
e.g. A mate pays me monthly for sharing Spotify or the like, so he's setup a monthly payment to me for his share. Or paying my rent weekly to the real estate. Works great if neither party actually needs the lump sum in one go.
By comparison, paying someone upfront the entire amount, and then me repaying of parts of that total would be essentially getting a loan.
I can't imagine any scenario where this would be necessary.
Probably buying drugs off your local dealer.
These credit options (Afterpay etc) charge the vendor a percentage, someone must pay.
Now - no
Future - I doubt very much