Does Affirm Loan Money? How Their Financing Works

Affirm is a financial technology company that provides a “buy now, pay later” service, allowing consumers to finance purchases over time. It offers an alternative to traditional credit cards or loans at the point of sale. Its model provides transparent financing for various goods and services, helping individuals manage spending. Affirm has become a significant presence in the buy now, pay later market.

Affirm’s Role in Lending

Affirm facilitates loans for consumer purchases, though it is not always the direct lender itself. The company primarily operates by partnering with various regulated financial institutions which originate the loans. In some instances, Affirm Loan Services LLC may also act as the lender. This structure enables Affirm to provide point-of-sale financing, distinct from traditional personal loans designed for general cash access.

Affirm’s lending model is built around offering installment loans directly at the checkout stage, whether online or in physical stores. Consumers receive specific financing for a particular purchase rather than a revolving line of credit. The company generates revenue through service fees charged to merchants, interest on loans to borrowers, or a combination of both. This approach allows Affirm to maintain a policy of not charging late fees, prepayment fees, or annual fees on most loans.

Accessing Affirm Financing

Consumers find Affirm financing options at online checkouts, through the Affirm mobile application, or by using virtual cards. When selecting Affirm at checkout, individuals are prompted to provide basic information for a pre-qualification process. This usually includes:
Full name
Email address
Mobile phone number
Date of birth
Last four digits of their Social Security number

Affirm performs a soft credit check using this information, which does not impact an individual’s credit score. This check helps determine potential eligibility and an estimated spending limit. General eligibility requirements include being at least 18 years old, residing in the U.S., possessing a valid U.S. phone number capable of receiving SMS, and having a U.S. bank account or debit card. Based on the purchase amount and the applicant’s creditworthiness, Affirm then presents various loan options, which can range from four interest-free bi-weekly payments to monthly installments that may include interest.

Key Aspects of Affirm Loans

The financial terms of Affirm loans vary depending on the specific purchase and the borrower’s credit profile. Annual Percentage Rates (APRs) can range from 0% to 36%, with many loans offering 0% APR, particularly for shorter terms or promotional offers. It is important for consumers to review the presented APR before accepting a loan, as it reflects the total cost of borrowing. Loan durations also differ, commonly ranging from 3, 6, or 12 months, though longer terms of up to 48 or even 60 months may be available for larger loan amounts.

The use of Affirm can influence an individual’s credit score. While the initial pre-qualification involves a soft credit check that does not affect the score, accepted installment loans may be reported to credit bureaus like Experian and TransUnion. Timely payments can help build a positive credit history, while missed payments, especially those over 30 days past due, can negatively impact credit scores.

Repaying and Managing Affirm Loans

Once an Affirm loan is approved, managing repayments is primarily done through the Affirm mobile app or the online portal. Consumers can make payments via bank account transfers or debit card, and setting up autopay is an option to ensure payments are made on time. The app and online account provide a clear overview of the payment schedule, showing upcoming due dates and the remaining balance.

Failing to make payments can have other consequences, including a negative impact on credit scores if payments become significantly overdue (typically 30 days or more). Consistent missed payments can also affect a consumer’s eligibility for future Affirm loans and may lead to the account being sent to collections. Borrowers have the flexibility to pay off their loans early without incurring any prepayment penalties or fees, which can result in savings on accrued interest for interest-bearing loans.