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I've never understood the appeal of using a product like Affirm, especially if you already have a credit card. Credit cards already give you a 30-day grace per
by Sohcahtoa82 5y ago
I've never understood the appeal of using a product like Affirm, especially if you already have a credit card.
Credit cards already give you a 30-day grace period before purchases start accruing interest. Using Affirm to extend that to 42 days seems inconsequential.
It seems like their target customer are people bad with credit, which would make them predatory.
- somerando7 5y agoI believe affirm provides 0% APR for a year sometimes?
- dlp211 5y agoOr longer. Peloton financing through affirm can be longer than 2 years.
- warent 5y agoI had poor credit from student loans and Affirm was very generous to me when other banks weren't. Affirm helped lay the foundations to rebuilding my credit. They've been good for at least my case
- op00to 5y agoHow was Affirm generous? Did they waive interest?
- skinnymuch 5y agoPoor credit means you’re not getting credit cards beyond measly ones
- thaway2839 5y agoIt's funny because giving people with poor credit loans they couldn't repay is exactly what led to the financial crisis and what we villainized the banks for.
- horsawlarway 5y agoThis is only true in a vague and mostly irrelevant manner. Yes - we gave people with poor credit mortgages to buy homes, and yes that did lead to the financial crisis, but not because they were poor and had bad credit. It was because the loans were very large, and were backed by the supposed value of the home the person was buying. Then packaged in ways that hid the risk until the last minute - making those assets toxic when the housing bubble popped. For small personal loans, there are not the same sort of systemic risks.
- JumpCrisscross 5y ago> helped lay the foundations to rebuilding my credit Does Affirm report paid-off loans to credit agencies?
- toomuchtodo 5y agoYes. They also report each payment (had an Affirm loan for an Aviron row machine, as it was the only way to buy it, which is a whole other story).
- FireBeyond 5y agoI have had at this point at least a dozen Affirm BNPL loans, all paid. There's not a single Affirm tradeline on any of my credit reports.
- toomuchtodo 5y agoOdd. It’s on my most recent tri merge credit report a lender pulled (and provided me) for a recent RE refinance. Looks like they are selective about which loans they report? My purchase was ~$2k, with 12 monthly payments. https://helpcenter.affirm.com/s/article/reporting-to-credit-bureaus https://helpcenter.affirm.com/s/article/reporting-to-credit-...
- dvtrn 5y agoespecially if you already have a credit card. Asked and answered? Majority of Americans have credit cards. An awful lot still don’t, and have shit financial situations that make getting one pretty hard. This is a widely documented phenomenon.
- oh_sigh 5y agoSpread out 0% Apr over 5 months instead of 2? Agreed about them being predatory. They literally lose money for every person that uses their service in the recommended/correct way, and only make money when someone flubs a payment.
- stu2b50 5y agoThat’s not how the business model works (or how they’d want it to work anyway). Affirm makes money on transactions in the “correct” way via very high merchant fees. Merchants will pay affirm a large fee for conversion benefits (e.g better a customer pay $700 even if I lose $50 to affirm fees than for them to pay $0 because they got spooked by the price). Affirm gets the fee. They suffer risks from inflation and nonpayment. Hopefully for them one is larger than the other.
- oh_sigh 5y agoAh, okay, fair enough then. I didn't realize merchants were paying affirm for this. Though I really hope the merchants look at their data. The only time I've used affirm is when I'm already on the checkout page, literally credit card in hand, where I would have bought the product no matter what. But yeah I'll take a 6 month 0% interest loan instead of a 1 month 0% interest loan.
- mint2 5y agoIf $X spooks someone for a discretionary spend item, then in most cases it’s a bad financial decision for them to pay $X just spread over Y months.
- bee_rider 5y agoThis is a problem with the whole credit system, right? Yes it is a bad system.
- drc500free 5y agoInstead of building wealth, we're polishing poverty so that more people can live right up against the edge.
- dimitrios1 5y agoThere are many purchases I have made with Affirm to take advantage of pay-over-time without interest. In these arrangements I imagine the product is giving Affirm a cut. Also for bigger purchases, it's better than a credit card. I pay my Amex balance off every month, but during the pandemic I used Affirm to purchase a home gym setup, and paid it over the course of 6 months at a much lower interest rate. They are definitely not predatory in my view, but I don't have the perspective of a low-income person anymore.
- Phrenzy 5y agoSome merchants will allow 6 months interest free through Affirm. I used them to finance my recent mattress purchase.
- gmadsen 5y agoive used them for a 12 month 0% interest. why not let them eat inflation for me, and I can put my money elsewhere
- notsureaboutpg 5y ago
- Ancalagon 5y agoWhere will you put the money you’ve saved to beat inflation? When the market is good I’d say this Is a good plan but when the market is bad the only place that makes sense Is a HYSA
- morpheuskafka 5y agoPlus (as long as you do so sparingly), you can easily open a new card and get 1-2 years interest free plus a sign up bonus.
- L_Rahman 5y ago0% APR over 12 months for a big ticket purchase like a mattress in an inflationary environment and a bull market can easily equal an additional 5-7% discount on 2000 dollars. Admittedly this is not how most people are using Affirm, but it's definitely been useful to me in that way.
- WYepQ4dNnG 5y agoThat's exactly how I have used Affirm in the past ;)
- cogman10 5y agoBingo. That's why I've done payment plans as well. Not because I couldn't just buy the thing, but because spreading the payments out over 12 months means more investment capital.
- ei8ths 5y agothat's exactly why I do the free 0% for 1 year on big payment plans. Let me keep my money in my investments longer. Yes I do have the money, but I don't want to easily give it up. Paypal just introduced like a 'spread the payments out for 3 months' options with 0% interest. Its awesome stuff.
- after_care 5y ago> because spreading the payments out over 12 months means more investment capital This is essentially borrowing money to invest. It doesn't matter if the investment makes money or loses money the lender will expect payment. This strategy can make a lot of money, but it's also ruined many people. One key thing to watch while implementing this strategy is your debt to assets ratio. Also understand that during a market crash this ratio might change suddenly and dramatically. I don't make small (sub $10k) purchases on credit, period. Not only is it somewhat risky but it also encourages overspending because it makes the 'pain' of spending money decrease. As for your $2000 mattress, I saved way more money by buying a $600 mattress instead and I sleep like a rock.
- 5y ago
- jonnycat 5y agoI can understand the value prop to the consumer - but I have a harder time understanding why it's an actual business, and why existing credit card companies or other lenders can't eat their lunch with the flip of a switch.
- cbhl 5y agoHere's patio11's write-up of the value to the business side: https://bam.kalzumeus.com/archive/buy-now-pay-later/ https://bam.kalzumeus.com/archive/buy-now-pay-later/ Also discussion thread for aforementioned piece: https://news.ycombinator.com/item?id=29841940 https://news.ycombinator.com/item?id=29841940
- kazanins 5y agoHi! Affirms scores (evaluates the risk) of each transaction in real time, which allows then to have reasonably low bad rates. Very few lenders can do it.
- radicaldreamer 5y agoUntil there's a credit crunch or a recession, in which case all that "real-time" risk management will be moot and losses will be massive.
- notsureaboutpg 5y ago
- acomms 5y agoI am curious why you think 'real-time' risk modelling in particular might be deficient? For the record I agree, but my issues are with fintech lenders desire to lend out money too freely (models that are designed to pump lending #'s, not repayment).
- kazanins 5y agoBanks have been saying that about online lenders for over decade now…and yet LendingClub, Upstart and SoFi loan books are still fine (and this three companies are taking 1/3 of all personal loan originations in the US)
- mslate 5y agoThe innovation isn’t the credit terms—-it’s A/B testing copy on the item & checkout page of e-commerce. Quoting on-demand loan pricing with clearer upfront payment amounts is more intuitive to consumers than “putting it on the credit card”.
- officeplant 5y agoMakes sense for when I want to buy a Mattress or piece of equipment equally expensive over 12+ months with no interest. Except in cases where there is an equally good or better arrangement via one of my cards like 18-24 months no interest.
- thaway2839 5y agoChase is now offering further extended payment options much like Affirm, etc. Might as well just go with your bank itself, instead of adding another 3rd party merchant into the mix.
- Ancalagon 5y agoI think Affirm differentiates based on how it evaluate loan giving
- 71a54xd 5y agoEven though I have the money, I've used this to leverage my liquid funds for side gigs. Although I have huge ethical issues with predatory companies like Affirm incentivizing people with less financial self-control to spend beyond their means. Honestly, I think companies like Chime are a bigger issue. They're the payday loan grift of today - especially with their advertising clearly targeting minorities that focuses on paycheck advances.
- BbzzbB 5y agoThe appeal, as I understand it (and I'm 100% an out-of-his-field armchair analyst here), is that this is loan sharking with extra steps ("late fees") for those of us with the worse credit scores that can't get better options. I forgot the exact number, but when I've done the math how much maximum interest you accrue by missing every payment is well beyond usury, as I recall it gets you above 30% interests in 2-3 months (and caps there, which I guess is the silver lining), where as I've considered "interest" to be late fees over the loaned amount. For every person using this to their advantage as a credit tool, I bet there are a dozen who are just sinking deeper into their debt quick sand.
- deleted 5y ago[deleted]
- matwood 5y agoIDK. My credit is great and anytime I'm offered 0% interest over 12-24 months for purchases $1k+ I take it. I much prefer having cash in hand. I don't buy very much stuff in general, but that's a different conversation.
- jallen_dot_dev 5y agoOther commenters are offering very rational reasons including inflation and the time-value of money, but I think there's a much simpler explanation when it comes to most people: they see a smaller number, it's psychologically easier to pay less today.
- barkerja 5y ago> Credit cards already give you a 30-day grace period before purchases start accruing interest. This depends on the timing of your transaction and your statement date. If you purchase something 1 day before your statement date, and you don't pay it off that same day, you will accrue interest.