When you’re tight on cash and need to make a relatively large purchase, it can be challenging to decide how to pay for it without breaking the bank. Some folks immediately whip out their credit cards, while others look for ways to avoid the purchase until they can afford it. Another more moderate approach could be paying for the purchase in monthly installments over a set period of time (e.g., 3, 6, 9 or 12 months) through a lending program.
One increasingly popular way for consumers to finance their purchases over time is by checking out with Affirm, which serves as a viable alternative to credit cards by letting you pay over time without incurring late fees, compounded interest, or early payment penalties. You might’ve already seen a “Pay with Affirm” option when checking out online. But, is it worth using? Here’s everything you should know about Affirm before using this innovative new fintech service.
What is Affirm?
Affirm is a financial technology company operating on the premise that consumers deserve more options when it comes to financing larger purchases (though you’re not limited to big ticket items when using the service). In a nutshell, Affirm functions similarly to a credit card in that you pay off your purchases over time, but unlike credit cards, you’re responsible for paying off your purchase in equal monthly increments on a set timeframe.
This approach can be advantageous for anyone who has struggled with credit card debt in the past or you don’t have easy access to enough credit to cover a purchase you’d like to make.
How Does Affirm Work?
Affirm bases its point-of-sale lending decisions on applicants’ credit reports; in other words, what your APR will be and how much you’ll be permitted to finance is predicated on your credit profile. At this time, about one-third of Affirm loans are financed at 0% interest, though it’s worth noting in some cases Affirm charges as much as 30% APR for consumers with little to no credit background or a poor history of credit usage.
When you choose to finance with Affirm, you’ll know upfront how much money you’ll need to pay each month and you can sign up for alerts and notifications to help remind yourself when a payment is due.
Which Brands Work with Affirm?
There are dozens of brands that work exclusively with Affirm, such as Peloton spin bikes, Delta Vacations, Casper mattresses, Swatch, Warby Parker, Wayfair furniture, YETI coolers, and many more. Categories to choose from include apparel, accessories, auto, beauty, electronics, home and furniture, fitness, travel, and events.
More than 2,200 brands are listed on Affirm’s website, so chances are you have or will shop at an online retailer that works with Affirm to provide flexible, transparent options for consumers who want to pay for purchases over time instead of 100% upfront.
Is Affirm Better Than the Alternatives?
If you qualify for a 0% financing offer from Affirm, then you likely won’t find a better deal elsewhere, assuming you pay off the loan on time and in full. This is even preferable to using credit cards with 0% introductory APRs because you won’t risk coming close to maxing out a credit card and hurting your credit score; instead, the Affirm loan functions as a separate line of credit reported to the three major bureaus.
Even if you don’t qualify for the 0% financing option, Affirm may be worth your while when it comes to financing larger purchases because it’s more regimented than a regular credit card. In other words, you have to pay off a higher amount each month (not a tiny minimum payment required by most credit card issuers) and you have to be consistent in your payments to avoid dings to your credit score. So, Affirm could help you develop healthier financial habits by essentially forcing you to stay on track to paying something off on a deadline.
Should I Try Affirm?
To determine whether you qualify for a low (or 0%) APR loan from Affirm, you can request a soft credit check before proceeding with the application. Folks with limited access to credit should also consider Affirm to avoid maxing out a credit card to pay for a large purchase (even if you’re paying interest – it could be more financially favorable to pay with Affirm than with your other credit cards).
Regardless of how you ultimately decide to finance your next major purchase, be sure to always read the fine print to ensure you understand every possible charge, fee or other financial matter involved before agreeing to anything.