Can You Pay Affirm Early to Avoid Interest?

Affirm provides a “buy now, pay later” service that allows consumers to finance purchases through various payment plans. A common question is how early payments affect the total interest charged. Understanding how Affirm calculates interest is important for anyone considering paying off a loan ahead of schedule.

Understanding Affirm’s Interest Charges

Affirm uses simple interest for many of its loans, which means interest is calculated only on the remaining principal balance of the loan. This differs from compound interest, where interest can accrue on both the principal and previously accumulated interest. With simple interest, as the principal balance decreases with each payment, the amount of interest charged in subsequent periods also reduces. Affirm’s annual percentage rates (APRs) typically range from 0% to 36%, depending on factors such as credit history, the specific merchant, and the loan terms.

Some Affirm payment plans, such as the “Pay in 4” option, often feature 0% APR or a fixed finance charge. In these cases, the total interest or finance charge is pre-calculated and set at the beginning of the loan, and this amount does not change regardless of how quickly the loan is repaid.

Making Early Payments on Affirm

Making an early or extra payment on an Affirm loan is a straightforward process, typically managed through their digital platform. To initiate an early payment, users can log into their Affirm account, either via the mobile application or the website.

Within the account dashboard, users can navigate to the section displaying their active loans. Selecting a specific loan reveals its details, including the amount due and upcoming payment dates. Users will find an option to “Make a Payment” or “Pay Early,” which allows them to choose a payment amount.

This can include making a scheduled payment ahead of time, paying a custom amount, or settling the entire outstanding balance. After selecting the desired payment amount, confirming the transaction completes the process.

How Early Payments Affect Your Total Cost

The effect of early payments on your total cost depends directly on the type of interest structure your Affirm loan utilizes. For loans that accrue simple interest, making payments earlier or in larger amounts than scheduled can reduce the total interest paid over the life of the loan. This occurs because the interest is calculated on the declining principal balance. By reducing the principal faster, less interest has the opportunity to accrue over time, leading to a lower overall cost.

However, for Affirm loans with a pre-calculated fixed finance charge or those offered at 0% APR, paying early will not reduce the total interest amount. While early payments on these fixed-charge loans do not save on interest, they still offer the benefit of shortening the repayment period. This can help clear financial obligations sooner and improve financial flexibility.