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 at the Affirm app.
The company promises that borrowers will know upfront how much they will pay and that amount will never rise. "Consumers who choose Affirm will never pay a penny more than what they agree to at checkout, even if they are late on a payment," says Silvija Martincevic, chief commercial officer at Affirm.
Here's more about how Affirm works and whether this alternative to a credit card could be right for you.
[Read: Best Low-Interest Credit Cards.]
How Does Affirm Work?
You can either select Affirm at checkout online or use an Affirm Visa virtual card for an in-store purchase. Affirm has partnered with more than 6,500 merchants, from Walmart to Peloton, and the virtual card is accepted at most places that take Visa.
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.
If you are approved, you can then choose to repay your loan in three, six or 12 months. However, your terms could be shorter or longer 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 subsequent payments are due every 30 days on the same date.
The Affirm virtual card is an option when a merchant doesn't offer Affirm online or when you want to use Affirm in a store. 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.
You may be able to have more than one Affirm loan at the same time. If you have one Affirm loan, you might have to wait before taking another if you have missed a payment, or you could be approved for one loan but not another. If Affirm cannot approve your loan, you will receive an email about the basis for the decision.
Does Affirm Have a Credit Limit?
Affirm approves credit lines from $50 to $17,500, but larger amounts may require a down payment. Credit 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 to see if you prequalify will not damage your credit score. What will damage your score is not paying the bill on time if you're approved for a loan.
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 annual percentage rate is 0% and you have four biweekly payments, or you were only offered one option: a three-month term at 0%.
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.
If you use Affirm, these factors can affect your credit score:
— Payment history with Affirm
— Amount of credit used
— How long you've had credit
Partial or late payments may hurt your credit score and ability to get another Affirm loan.
[Read: Best Personal Loans.]
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 30%.
Affirm's website offers some examples of what you might pay. For a $500 loan at an APR of 15%, you might be able to choose from three monthly payment plans: three payments of $170.94 and $12.82 in total interest, six payments of $87.04 and $22.24 in total interest, or 12 payments of $45.15 and $41.80 in total interest.
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.
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.
Is Affirm Safe?
Affirm says it meets all 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 make a decision within 15 days. If the dispute is resolved in your favor, you will receive a full refund of the purchase price.
[Read: Best Secured Credit Cards.]
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 when you used a debit card or ACH payment. A refund could take more than 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," Jacob says.
"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."
But as with credit cards, these loans could easily lead you to overspending, Thomas says.
"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."