Affirm Personal Loan Review: Pros and Cons

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During the pandemic, online shopping has become a necessity for most people. Rather than perusing the aisles of a grocery store or strolling through the mall, most people have opted for the ease and security of purchasing items online and having them shipped to their homes.

“Buy now, pay later” has made it even easier for consumers to purchase items online. Now, when consumers buy an expensive item like a Peloton bike or make smaller purchases like second-hand clothes from ThredUp, they no longer have to make a lump sum payment.

People can spread their spending over a fixed period of time and opt for 0% interest rate loans with no late fees with point-of-sale loans. Indeed, a recent study carried out by Morning consultation found that 17% of American adults used a “buy now, pay later” loan in June.

To affirm is one of those popular “buy now, pay later” options. To affirm gives customers the ability to repay their loans within a typical period of three months to a year and is integrated with the websites of many retailers such as Target, Walmart, Peloton, Neiman Marcus and Nike.

Below, Select takes a look at some of the pros and cons of using this POS loan provider.

How does Affirm works?

APR and fees

Interest rate for To affirm loans can range from 0% to 30%, which is higher than the highest APR of most credit cards. 43% of loans taken out at Affirm have an APR of 0%, according to the company.

When To affirm determines your loan eligibility and interest rate, the company reviews your personal information, your credit score, when you applied for the loan, your payment history with Affirm (if applicable) and how long you have been have an Affirm account.

Another important factor that Affirm takes into account when deciding your interest rate is each merchant’s APR. Some merchants offer 0% interest for a limited time and some offer 0% APR for qualified customers.

When you pay interest on your Affirm loan, you are paying simple interest, not compound interest (or interest on your interest). In other words, your monthly payments will be fixed, so you won’t have to worry about your installment increases over time.

Also affirm do not charge late fees Thus, if you cannot make your payment on time, you will not be charged any fees. However, if you are behind on your payments you could be denied an Affirm loan in the future and for loans that are reported to Experian this could end up hurting your credit score.

You can also choose the length of your repayment loan, ranging from 1 month for small purchases to 48 months for more expensive purchases. Your installment payments are usually due every two weeks or monthly.

How to apply for a loan

After you submit information about yourself to Affirm, you will be approved or denied a loan almost instantly. Affirm will not change the terms and conditions you agree to. You want to read the fine print carefully to determine if you will be able to make your installment payments over the life of the loan. Sometimes you will be approved for a loan, but you will also need to put down a down payment on it.

If you are rejected for a loan, you will receive an email explaining why.

If you are unsure whether you want to apply for a loan, Affirm also offers consumers the option to “pre-qualify” for a loan, which allows you to see the value of the loan for which you are eligible. There are two ways you can pre-qualify for a loan: either through the app or through the merchant’s website. Prequalification does not affect your credit score.

Payment methods

With Affirm, you can pay with your debit card, bank account, or check. You can also use automatic payment, which is a good option if you don’t want to worry about remembering when your payments are due. If you are late with your payments, Affirm does not charge any late fees, so if you are ever late for a payment, you will simply be reminded by email or text.

If you are behind on your payments or default on your loan, Affirm could deny you a loan in the future and this information may be reported to the credit bureaus, which could cause your credit score to decrease. credit.

Amount of the loan

Each loan you take out through To affirm is subscribed individually. You can take out multiple loans from the provider, and being approved for one Affirm loan does not guarantee that you will be approved for another loan. The maximum value you can take on a loan is $ 17,500.

Impact on credit rating

People should know that To affirm can have a positive or negative effect on their credit rating. Whether or not Affirm has an effect on your credit score depends on various factors such as the type of loan and your payment history. When Affirm first determines your eligibility for a loan, it only performs an indirect investigation which has no effect on your credit score.

When it comes to repaying the loan, the provider only reports some loans at Experian. Specifically, it does not report loans with 0% APR and 4 biweekly payments or loans where people have had a three-month repayment option with 0% APR.

If Affirm reports your payment history to Experian, the entire loan history is reported, whether positive or negative. When this happens, your payment history, the amount of credit you’ve used, how long you’ve had the credit, and overdue payments are all reported to Experian. By defaulting on your loan or making late payments, you risk lowering your credit score.

Return

When you return an item, you are returning it through the merchant. If you are buying an item that you are unsure of keeping, a POS loan is probably not your best bet: To affirm only repay the principal of the loan. In other words, the interest you paid on your purchase will not be refunded to you.

At the end of the line

Since the terms and conditions on To affirm Loans vary, if this POS loan is right for you it depends on your financial constraints and the specific terms of the loan. If you don’t read the fine print of your loan when you sign up, you might be surprised at the double-digit interest rates and negative payment history reflected on your credit report.

If you buy an item that carries a high interest rate and you won’t be able to afford it for months in the future, it’s best to skip the point-of-sale loan and stick with a card. credit or debit. You might also be able to get a lower APR on a credit card and if you can pay your monthly credit card bill you can avoid APRs altogether.

There are many credit cards that offer an introductory 0% APR on purchases period so you can buy an expensive item and spread the cost over time without paying interest – but you’ll want to pay it off before the end of the purchase. the introductory period, so you can avoid paying interest.

The Chase Freedom Flex℠ and the American Express Blue Cash Everyday® Card are cards that offer an introductory period of 0% APR on purchases. You will also get cash back on your purchases.

However, if you are able to get a 0% APR on your loan, Affirm might be a good choice as it allows you to avoid paying the full cost of an item up front – this could be particularly useful for big ticket items like furniture. or exercise equipment. An Affirm loan might also be a better choice than a credit card if you think you won’t be able to pay your monthly credit card bill on time and in full.

Chase Freedom Flex℠

  • Awards

    Get 5% Cash Back on grocery store purchases (excluding Target® or Walmart® purchases) up to $ 12,000 spent in the first year, 5% Cash Back on up to $ 1,500 in combined purchases in bonus categories each quarter you activate (then 1%), 5% off travel booked through Chase Ultimate Rewards®, 3% off drugstore purchases and meals (including meal services eligible takeout and delivery), 1% discount on all other purchases

  • Welcome bonus

    $ 200 cash back after spending $ 500 on purchases in the first three months after opening the account

  • Annual subscription

  • Introduction APR

    0% the first 15 months from the opening of the account on purchases

  • Regular APR

    14.99% to 24.74% variable

  • Balance transfer fees

    Either $ 5 or 5% of the amount of each transfer, whichever is greater

  • Foreign transaction fees

  • Credit needed

American Express Blue Cash Everyday® Card

On the secure American Express site

  • Awards

    3% cash back at U.S. supermarkets (up to $ 6,000 per year in purchases, then 1%), 2% cash back at U.S. gas stations and some U.S. department stores, 1% cash back % on other purchases. Cash back is received in the form of reward dollars which can be easily redeemed for statement credits.

  • Welcome bonus

    Get a $ 200 credit on your statement after spending $ 2,000 on purchases with your new card in the first 6 months.

  • Annual subscription

  • Introduction APR

    0% for the first 15 months on purchases, N / A for balance transfers

  • Regular APR

    13.99% to 23.99% variable

  • Balance transfer fees

  • Foreign transaction fees

  • Credit needed

For pricing and fees for the American Express Blue Cash Everyday® card, click here.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.


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