Affirm is a lender that allows you to buy now and pay later, whether you’re shopping in-store or online. If you qualify for one of these short-term loans, you will choose a payment schedule and then pay at affirm.com or in the Affirm app.
The company promises that borrowers will know upfront how much they will pay and that amount will never rise.
Here’s more about how Affirm works and whether this alternative to a credit card could be right for you.
[Read: Best Low-Interest Personal Loans]
How Does Affirm Work?
You can either select Affirm at checkout online or use an Affirm Visa virtual card for an in-store or online purchase. Affirm has partnered with over 245,000 merchants, from Walmart to Peloton, and the virtual card is accepted at most places that take Visa.
If you prefer desktop shopping, you can download the Affirm browser extension for Chrome and log in to your Affirm account through the extension to make purchases.
First, you will provide information such as your name, cellphone number and birthdate to prequalify for a loan without hurting your credit score. You will then receive a real-time decision about whether your loan has been approved and how much you can spend.
While Affirm doesn’t disclose income requirements, the lender does take your income and debt-to-income ratio into consideration when deciding whether or not to approve you.
If you are approved, you can then choose how you’d like to repay your loan:
— Affirm Pay in 4: This option allows you to pay back your loan in four interest-free payments every two weeks. Pay in 4 loans come with no interest or fees and there’s no predetermined loan amount. Instead, the amount depends on how much you want to borrow and your ability to pay it back.
— Monthly installments: This option is preferable for larger purchases. However, interest rates range from 0% to 36%, and your terms vary depending on the store, the purchase and your credit.
During checkout, you will see the total interest you will pay, and Affirm pledges never to charge you more than that. If you pay faster than the agreed-upon terms, you might save money.
Your first payment is usually due one month after the merchant processes your purchase, and due dates for subsequent payments depend on the payment plan you choose.
The Affirm virtual card is an option when a merchant doesn’t offer Affirm at checkout. You can request a virtual card on the Affirm website or app and have the loan amount loaded onto the card for one-time use. You’ll enter the card number if you’re paying online, or load the card onto Apple Pay or Google Pay and use it at most places where Visa is accepted.
Note that you may be able to have more than one Affirm loan at the same time. You may be approved for loans at some stores but not others, and if you have one Affirm loan, you might have to wait before taking out another. Each loan application is considered separately.
Does Affirm Have a Credit Limit?
Affirm is not a revolving line of credit with a limit like a credit card. The company offers short-term loans with fixed payments. Revolving credit, on the other hand, allows you to repeatedly borrow up to a limit, repay it and borrow again as needed.
Affirm approves loans from $50 to $30,000, and large amounts may require a down payment. Loan limits vary by merchant and will depend on your credit record and payment history with Affirm.
The lender has no minimum credit score to qualify for a loan, and checking whether you prequalify will not damage your credit score. What could damage your score is not paying the bill on time if you’re approved for a loan.
[Read: Best Bad Credit Loans.]
Does Affirm Affect Your Credit Score?
Some loans will not be reported to the credit bureaus. Affirm says it will not report your loan to Experian if the APR is 0% and you have four biweekly payments; i.e., if you selected Affirm’s Pay in 4 payment option.
The lender may report your payment history for other loans to Experian. Affirm may report any loan with delinquent payments, which can damage your credit score.
Does Affirm Charge Interest and Fees?
Unlike with credit cards, you do not pay compound interest, or interest on interest, and Affirm charges no late fees or penalties. You won’t owe prepayment, annual or account maintenance fees.
Interest on loans through Affirm is charged only on the purchase amount, or the principal balance, which saves you money. The merchant and the purchase amount for each loan will determine whether you pay interest. Many Affirm partners offer 0% financing, but APRs on other loans range from 10% to 36%.
How Do You Pay Your Affirm Balance?
You can make or schedule payments at affirm.com or on the Affirm app using your debit card or checking account, or you can mail a check. Some 0% APR loans, also called Pay in 4 loans, can be paid using a credit card as well.
Affirm sends email and text reminders for payments and offers automatic payments, but you need to turn on this option by logging into your account. This will automatically deduct your monthly payment each due date from a debit card or bank account.
If you want to stop using autopay, you will need to turn it off at least 24 hours before your next payment is due. For an overdue amount, you will need to schedule a one-time payment and cannot automatically debit it.
[Read: Best Balance Transfer Cards]
Is Affirm Safe?
Affirm says it meets industry standards for protecting customers’ personal information. You’ll need a cellphone number to create an account and sign in, plus two-factor authentication to verify your identity.
Users are not responsible for unauthorized purchases, and Affirm has teams dedicated to investigating such incidents.
If you’re having a problem with a purchase that you can’t resolve with the merchant, Affirm can open a dispute on your behalf as long as the transaction was within the last 60 days.
Both sides have 15 days to make their case, and Affirm will notify you of their decision within 15 days. However, if you used the Affirm virtual card for the transaction, you’ll be notified within 90 days. If the dispute is resolved in your favor, you will receive a full refund of the purchase price.
How Do Returns Work With Affirm?
You will need to contact the merchant to request a refund. While you’re waiting on a refund, you must continue to make any loan payments that are due.
Affirm issues refunds to your original payment method, but you may receive a check if you used a debit card or ACH payment. A refund by check could take up to 30 days to reach your account.
Should You Use Affirm?
Buy now, pay later services such as Affirm can be useful for the right person, says Linda Jacob, certified financial planner, accredited financial counselor and director of education at Consumer Credit of Des Moines.
“If it’s used responsibly, especially at 0%, it can be a great tool, ” Jacob says.
She warns customers to always read the fine print and be aware of the interest rate and the term. At higher interest rates, such as 30%, these loans can “get out of hand,” says Jacob.
“Anyone who is already in an exorbitant amount of debt should avoid getting any more loans,” she says.
At the same time, Affirm could help someone who is “dead set on a purchase,” says Charles H. Thomas III, certified financial planner and founder of Intrepid Eagle Finance in Clover, South Carolina.
“They might pay less in interest and fees with a model like Affirm than on a credit card balance,” he says.
But as with credit cards, these loans could easily lead you to overspending, says Thomas.
“Our desire for instant gratification is strong and hard to overcome sometimes,” he says. “Most folks are better off waiting to make a purchase when they have the money available.”
More from U.S. News
How to Get a High Credit Score
How to Prevent Credit Card Fraud
How to Rebuild Your Credit After a Missed Credit Card Payment
Everything You Need to Know About Affirm originally appeared on usnews.com
Update 03/06/24: The story was previously published at an earlier date and has been updated with new information.
