How does Buy Now Pay Later, HECS and Afterpay affect my pre-approval amount?

These often get bundled into one worry, but HECS-HELP and Buy Now Pay Later are very different things, and they affect your pre-approval in different ways. It is worth separating them, because the rules around HECS in particular changed in 2025 in ways that work in your favour.

HECS-HELP is not like a normal debt

A HECS-HELP debt is the student loan many Australians carry from study. Unlike a car loan or a credit card, it has no fixed contractual repayment and does not charge interest in the usual sense. Instead it is indexed each year, and you only make compulsory repayments once your income passes a threshold, collected automatically through the tax system as a percentage of your income. That income contingent nature is the whole reason it is treated differently.

Does HECS show on your credit file?

No. A HECS-HELP debt does not appear on your credit report and does not directly affect your credit score. So in that sense it is invisible to the credit side of your application. That surprises people who assume any debt drags their score down. HECS simply is not in that part of the picture.

So why does HECS reduce my borrowing power?

Even though it does not touch your score, your compulsory HECS repayment is counted as a committed expense when a lender works out how much you can afford to repay. That repayment reduces the income the lender treats as available for a mortgage, which lowers the amount it will lend. The larger your compulsory repayment, the bigger the effect. So HECS does not block a loan, but it can trim your borrowing power.

The 2025 changes that helped

Several changes in 2025 made HECS friendlier for home buyers, and they are worth knowing.

• From the first of June 2025, the government applied an automatic one off reduction to HELP balances, handled by the tax office with nothing required from borrowers.
• From the first of July 2025, the repayment system moved to a marginal model, so you repay only on income above the threshold, which reduced repayments for many.
• From the thirtieth of September 2025, APRA finalised guidance allowing lenders, by exception, to disregard a HELP debt in serviceability where it is expected to be repaid within about twelve months.

That last change matters most for pre-approval. If you are close to clearing your HELP debt, some lenders can now set it aside in their assessment, which can lift your borrowing power. How each lender applies this varies, so it is very much a lender by lender question.

Buy Now Pay Later: Afterpay, Zip and similar

Buy Now Pay Later is a different beast. Accounts like Afterpay or Zip are treated as commitments, and they show up clearly on your bank statements. Heavy or frequent use can count against you in two ways: the repayments reduce your serviceable income, and a pattern of relying on Buy Now Pay Later can give a lender a poor impression of how you manage money. The available limit on these accounts can also be treated as a potential commitment, in the same way a credit card limit is.

Because of this, unused or lightly used Buy Now Pay Later accounts are worth reviewing and often closing before you apply, and it is wise to ease off using them in the months leading up to an application.

What to do before you apply

A few practical steps can protect or even improve your pre-approval amount.

• Know your HECS repayment timeline, and tell your broker if you are close to paying it off, since that can change how it is assessed.
• Reduce or close Buy Now Pay Later accounts you do not need, and keep your statements clean in the lead up.
• Be upfront about all of your commitments, since undisclosed ones tend to surface anyway.
• Get advice on lender choice, because treatment of HECS and Buy Now Pay Later genuinely varies between lenders.

Why lender choice matters here

This is an area where the right lender can make a real difference. One lender might apply the new HECS exception and barely blink at a near finished HELP debt, while another takes a more conservative view. A broker who knows the policies can steer your application to a lender whose approach suits your situation, which can directly affect the number you are pre-approved for.