How Affirm Works and What You Should Know About It

Dec 07, 2023 By Susan Kelly

Payday loan startup Affirm was created in 2012 by PayPal co-founder Max Levchin and is purchased now, pay later service. Nowadays, it appears to be ubiquitous, with the ability to split your purchase into many installments directly during the checkout process. Business is also flourishing. In the second quarter of 2021, revenue grew by 55% over the second quarter 2020. Because Affirm is designed to be quick and straightforward, it's a good idea to check to ensure you're not paying more for convenience.

What Is Affirm's Purpose?

It's all the same, yet each buys now, pay later service operates somewhat differently. You can stretch out the cost of your purchase during the checkout stage under the payment choices section. You apply for a short-term loan and get authorized in a matter of seconds: Pay a modest deposit and then spread out the balance over a few weeks or months. A third-party lender, not the retailer, is providing you with this credit. One of these non-bank lenders is Affirm.

Do Affirm Payments Split Into 4 Installments?

You may be required to pay back your loan in four equal installments if you obtain a point-of-sale loan. Three more installments follow the down payment at the time of purchase. When it comes to payment options, 3 Affirm lets you pick and choose from a variety of options. To illustrate, consider the possibility of making three, six, or twelve payments throughout the course of the transaction.

Is Affirm Secure?

When it comes to Affirm and other "buy now, pay later" retailers, there are fewer consumer safeguards than with credit cards. No zero-liability fraud protection or insurance-style benefits are available to you. You might be tempted to buy more than you need because they're so easy to use.

For this reason, you should carefully consider whether you need a personal loan before applying for one. Using a buy-now-pay-later lender takes care of that. It's possible to apply for many loans at once using Affirm. Managing several Affirm loans might be a hassle because you can't combine them into a single loan.

How Much Interest And Fees Does Affirm Charge?

In contrast to credit cards, Affirm does not impose late fees or interest on interest. If you don't want to pay a charge to open an account, you won't have to do so. Using Affirm, you pay interest on your principle or the borrowed amount, saving you money. Many Affirm partners provide 0% financing. However, other loans have APRs ranging from 10% to 30%. It's possible to see how much you could be charged on Affirm's website. Payback options include three monthly installments of $170.94 and $12.82 total interest, six payments of $87.04 and $22.24 total interest, or twelve payments of $45.15 and $41.80 total interest for a $500 loan with a 15% APR.

How Do You Pay Your Affirm Debt?

Affirm.com and the Affirm app allow you to use your debit or checking account to make or schedule payments, or you may mail a check. Automated payments are available through Affirm, but you must enable this feature first by signing into your account. Your monthly payment will be automatically deducted from your debit card or bank account on the due date. You must turn off autopay at least 24 hours before the next payment is due if you wish to discontinue it. You will have to make a one-time payment for a late amount, and you can't automatically debit it.

Is Affirm Right for You?

Linda Jacob, a certified financial planner, licensed financial counselor, and director of education at Consumer Credit of Des Moines, believes that Affirm, a buy now, pay later program, can benefit the appropriate person. It's a terrific tool when appropriately utilized, especially at zero percent, Jacob explains.

She advises customers always to read the tiny print and be mindful of interest rates and terms. Jacob warns that these loans can "get out of hand" at interest rates of 30 percent or more. According to her, anyone who already has a large amount of debt should avoid taking out any new loans.

At the same time, Charles H. Thomas III, certified financial advisor and founder of Intrepid Eagle Finance in Clover, South Carolina, argues that Affirm might benefit someone who is "dead determined on a purchase."

Returns with Affirm: What's the Process?

Affirm urges customers to contact the merchant directly if they have a problem with a purchase or wish to return an item. In this case, you'd have to adhere to the store's return policy. There are a few alternatives for what happens to your Affirm loan when you make a return. When a merchant has completed the refund, Affirm can cancel your loan entirely. Affirm can return the overpayment if the amount returned to you exceeds the loan amount.

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