If you’re considering a small personal loan to finance your next purchase, this Affirm review is for you.
The startup finance company promises to make personal finance decisions faster, easier and smarter for consumers.
So we bought a Macbook using Affirm last week to see: is Affirm legit? Read on to see our first-hand experience.
What Is Affirm?
Affirm offers transparent, real-time loans for everything from designer clothing and travel expenses to prescription eyewear and more.
The company was founded by Max Levchin, who was one of the original co-founders of PayPal. He’s also a co-founder for SciFi VC and Glow, and he operates the HVF innovation lab in San Francisco, California.
Levchin and his co-founders designed Affirm personal loans to give consumers an alternative to expensive credit card debt. If you use credit cards or other interest-accruing funding options to finance the occasional big purchase, the app could save you money in the long term.
You may also benefit from Affirm loans if you’re ready to accelerate your business or elevate your lifestyle. You may not have enough cash on hand to finance your purchases upfront, but perhaps you can afford to keep up with a payment plan to make those dreams happen without delay.
A colleague of mine needed a laptop, so he opted to buy a laptop to help us write a better review for you.
How Does Affirm Work?
Affirm offers real-time personal loans issued at the point of sale. That’s one of the primary factors distinguishing it from a credit card.
Instead of establishing a line of credit and then spending money at multiple stores over time, you apply for a set loan amount specific to one purchase. Note: you can use Affirm by shopping directly with one of their retail partners or you can use the Affirm app to shop anywhere.
So, how does Affirm work exactly? What are the steps to getting an Affirm loan? Read this rest of our Affirm review to see our experience with them…
1. Create your Affirm account
2. Find a participating retailer
We found a nice Macbook on Electronic Express. First, we checked if they accepted Affirm.
They did (see order summary below).
Pictured: participating retailers offer an option to checkout with Affirm, like this one.
You can also use the app or Affirm website to shop for products, services, and travel arrangements offered by other retailers, both in or outside of their partnership network.
But you need to know the product, price, and retailer before you can apply for an Affirm loan.
3. Apply for a loan in real-time.
Once you’re ready to purchase, you should see an option to apply via the store or on the Affirm website or app.
Does Affirm Affect Your Credit Score?
You do authorize Affirm to perform a soft credit check before you’re approved. This isn’t a hard inquiry, so it won’t impact your credit score. They simply need to look at your credit report to determine your creditworthiness at the time of application.
Affirm Interest Rate
You will clearly see what interest rate is offered by that retailer. Hit the button to apply for a loan, entering your desired loan amount. You should receive approval or denial within seconds.
4. Choose your loan terms.
If approved for the loan, you’ll have at least two or three payment plan options. All loan offers tell you the following information:
- Amount of the loan
- Number of months for repayment
- Monthly payment amount
- The due date for payments
- Interest rate
Affirm loans are never based on compounding interest. There are no late fees, prepayment fees, or hidden costs.
And you will know the complete cost of your loan before you accept the terms. Most loan offers extend for three, six, or 12 months. Longer terms may apply at retailers.
You decide the terms of your loan. You’re allowed to pay higher monthly payments in order to pay the loan off quickly or accept lower payments for a longer loan. This is a big plus.
Note: keep your current financial position and future money goals in mind as you make that personal finance decision.
Also, note that all loans are offered by Cross River Bank, which is a member of the FDIC.
5. Complete your Affirm purchase
Once you select a payment plan and accept your loan, you complete the purchase just as you would with any other payment type.
They will issue you a virtual debit card on the spot, and it’s only good for that one purchase.
Enter the card number and expiration date to process your transaction and receive your product immediately or upon shipment, depending on the purchase method and store.
You can monitor your payments through the app or website. You’ll see a list of all future payments, and they will check off as they’re paid. You can pay off all future payments at once with no prepayment fee.
The Fine Print
The fine print is where the Affirm loan terms are. We discovered there’s a lot to love about Affirm.
The interest rate that you receive depends on your chosen retailer and the details of your credit report. Many retailers are currently offering 0% interest, but that may not last as Affirm transitions from a startup to an established provider of personal loans.
All Affirm loan offers have the same terms, with none of the following:
- Deferred interest
- Compounding interest
- Prepayment penalties
- Late fees
- Annual fees
- Hidden fees
What Credit Score Do You Need To Qualify for an Affirm Loan?
You may not need perfect credit to qualify for an Affirm loan, but your credit report should reflect your ability to repay according to the terms of the loan.
In a press release, Affirm stated that their business policy is to provide loans to consumers with the ability to repay their loans in full and on time. That may mean denials for anyone with bad credit or a report riddled with missed payments and closed accounts.
If you don’t have the best credit, you may also receive loan offers for a limited loan amount. For instance, you may receive approval for a purchase of $300 while someone with better credit is approved for a $1,000+.
We’ve talked a lot about the advantages of using an Affirm loan and how the program is different from other financing options.
Now, let’s cover a few potential downsides to Affirm personal loans.
- Financing may make store returns more complicated. You start the process by returning the merchandise to the retailer. The retailer must then process the refund with Affirm. It can take some time for Affirm to complete the process with your account.
- You’re not guaranteed to receive approval for your full requested loan amount. In that case, you may need to make a down payment in order to complete the purchase.
- Affirm may take additional steps to verify your identity before approving your personal loan. You won’t receive real-time approval if that applies to your application.
- Many consumers have reported that they don’t always report timely payments to the credit bureaus. That’s often frustrating for consumers trying to rebuild their credit.
- Each loan is based on an individual purchase, so you don’t receive a rolling line of credit.
There are some complaints that Affirm requests higher interest rates than some consumers might receive from other lenders.
Keep in mind that it doesn’t work with hidden fees, never charges late fees, and doesn’t compound interest over time.
When you look closely at other personal loans and credit cards, you may find that it is the more affordable option when all terms are considered.
Is Affirm Safe?
Yes, absolutely. Affirm is a 100% legitimate financing option for consumers–even with decent credit.
The company offers short loan terms, so you don’t carry the debt for years as you would with a credit card purchase.
You also pay a flat amount in interest, so it doesn’t compound over time and increase the total cost of your purchase. It’s an honest payment plan for one purchase rather than a rolling debt that never goes away.
Where Can I use Affirm?
Affirm can be used at many different retailers. From apparel to auto to home and furniture, their options are steadily growing.
You can see a full list of who you can shop with and use Affirm on their website, but here are a few:
- Kate Spade
- The RealReal
- The Tire Rack
- National Tire & Wheel
- Simply Mac
- Pottery Barn
- Delta Vacations
How Does Affirm Make Money?
Affirm offers fast convenient loans for those that need it. But how do they make money? They charge you an interest rate typically around 18% APR and they make money off of the interest of your loan.
Is Affirm Best for You?
There are now more than 1,000 retailers partnering with Affirm, including Wayfair, Expedia, Dell, and Casper.
As the personal finance startup becomes a more established company, that network is likely to grow. If you need to not front the money for a purchase and are short of other options, they may very well be your best option!