4 ms·

Why is this being treated like a new concept? Has the author never heard of layaway? It used to be quite common, and this is a strictly better version imo

woodruffw 4y ago
Layaway is a different scheme: you pay down the price of a purchase in installments, and receive the item after the last payment. The layaway agreements that I'm aware of don't charge interest. These schemes are VC-ified installment loans, which operate on the opposite model: you receive the purchase up front, and pay it down over time including interest payments. They're arguably better on a strictly economic scale, since they give consumers the liquidity to make purchases that they'd like to make (and can actually afford, just not all at once.) They're arguably worse on a social scale, since installment loans are a form of cheap credit that people get addicted to, and are comparatively unregulated.
- marcofatica 4y ago
  Most of the ones I've seen had no interest, so that's new to me. Definitely changes it but I think it's a little disingenuous for the author to not at least reference layaway
  - woodruffw 4y ago
    For what it's worth, layaway isn't common in the US anymore. It's entirely possible they didn't know about it, or don't consider it worth mentioning because the couldn't find an example of a company actually offering it anymore. The article was written in 2017, and mentions an APR of 19% for a $200 purchase via Affirm. Looking online it looks like their current rates are around 10-13% unless you pick the shortest term loan[1]. [1]: https://www.affirm.com/how-it-works https://www.affirm.com/how-it-works
    - wincy 4y ago
      It depends on risk. I lost my job and ended up tanking my credit score after several thousand in credit cards went to collection. Affirm offered me 29.99% APR for purchases.
- stuff4ben 4y ago
  I bought something off Amazon with Affirm, wasn't charged interest. I think they make money by partnering with companies like Amazon to promote more buyers and get a cut of sales from them instead of the consumer.
  - woodruffw 4y ago
    Out of curiosity, what were the repayment terms? I see on their website that they offer 0% APR on some of their shortest financings, so I wonder if you were bucketed into one of those. (I would personally consider doing installments at 0%, so I'm curious as to whether you were given an advantageous plan based on a credit check or whether it was the timescale.)
    - filoleg 4y ago
      I think you are correct about it being timescale-based. I only used it once out of pure curiosity, so idk all of the intricate details, but they essentially offered a 4 equal monthly payments plan with 0% interest, as long as I pay it off on time. Tested it, worked as promised, all was good. I bet if you go outside of their deadlines for payments/try to stretch it for longer, you will get hit with massive interest rates tho, but cannot confirm that. Mostly because I only use credit for things I can easily pay off in cash at any moment (except things like car/house obv), so I basically treat it like a debit card and pay it off very pedantically on time (because with 0% interest, it is essentially just extra leverage).
    - stuff4ben 4y ago
      It was something like 6 payments at 0% interest so I took advantage of it. It was just offered as a payment option on the Amazon link. I'm seeing that now for condos I'm looking at renting next year too. While I can pay cash up front or just put on my credit card, I'd rather it sit and generate whatever small amount of interest and just use this to pay off my vacation over a few months with no interest.
EddieDante 4y ago
I miss layaway, and TBH I wish we had layaway for big-ticket items like houses, cars, and POWER9 workstations.
- dhosek 4y ago
  I never really got the point of layaway. I give you money and you keep it interest-free until I pay for the item? Why not just put it into my own savings account and at least get interest on it?
  - fknorangesite 4y ago
    > Why not just put it into my own savings account and at least get interest on it? Because if it's immediately available in a savings account, the vast majority of people are much more likely to spend it on something else. The appeal of layaway is the willpower enforcement - worth the price of whatever pocket change you're likely to get in savings-account interest.
  - EddieDante 4y ago
    For me, the point of layaway is that I want something enough to commit to paying for it in advance a little at a time. A savings accounts is fungible; it isn't necessarily dedicated to anything and subject to me raiding it if I need to cover an unexpected expense. Incidentally, where do you live that the interest on a mere savings account is worthwhile on a timescale of years rather than decades or centuries? Or am I taking "savings account" too literally when you mean things like certificates of deposit or money-market accounts?
    - lotsofpulp 4y ago
      > For me, the point of layaway is that I want something enough to commit to paying for it in advance a little at a time. A savings accounts is fungible; it isn't necessarily dedicated to anything and subject to me raiding it if I need to cover an unexpected expense. You are making dhosek’s argument for them.

woodruffw 4y ago

Layaway is a different scheme: you pay down the price of a purchase in installments, and receive the item after the last payment. The layaway agreements that I'm aware of don't charge interest. These schemes are VC-ified installment loans, which operate on the opposite model: you receive the purchase up front, and pay it down over time including interest payments. They're arguably better on a strictly economic scale, since they give consumers the liquidity to make purchases that they'd like to make (and can actually afford, just not all at once.) They're arguably worse on a social scale, since installment loans are a form of cheap credit that people get addicted to, and are comparatively unregulated.

marcofatica 4y ago
Most of the ones I've seen had no interest, so that's new to me. Definitely changes it but I think it's a little disingenuous for the author to not at least reference layaway
- woodruffw 4y ago
  For what it's worth, layaway isn't common in the US anymore. It's entirely possible they didn't know about it, or don't consider it worth mentioning because the couldn't find an example of a company actually offering it anymore. The article was written in 2017, and mentions an APR of 19% for a $200 purchase via Affirm. Looking online it looks like their current rates are around 10-13% unless you pick the shortest term loan[1]. [1]: https://www.affirm.com/how-it-works https://www.affirm.com/how-it-works
  - wincy 4y ago
    It depends on risk. I lost my job and ended up tanking my credit score after several thousand in credit cards went to collection. Affirm offered me 29.99% APR for purchases.
stuff4ben 4y ago
I bought something off Amazon with Affirm, wasn't charged interest. I think they make money by partnering with companies like Amazon to promote more buyers and get a cut of sales from them instead of the consumer.
- woodruffw 4y ago
  Out of curiosity, what were the repayment terms? I see on their website that they offer 0% APR on some of their shortest financings, so I wonder if you were bucketed into one of those. (I would personally consider doing installments at 0%, so I'm curious as to whether you were given an advantageous plan based on a credit check or whether it was the timescale.)
  - filoleg 4y ago
    I think you are correct about it being timescale-based. I only used it once out of pure curiosity, so idk all of the intricate details, but they essentially offered a 4 equal monthly payments plan with 0% interest, as long as I pay it off on time. Tested it, worked as promised, all was good. I bet if you go outside of their deadlines for payments/try to stretch it for longer, you will get hit with massive interest rates tho, but cannot confirm that. Mostly because I only use credit for things I can easily pay off in cash at any moment (except things like car/house obv), so I basically treat it like a debit card and pay it off very pedantically on time (because with 0% interest, it is essentially just extra leverage).
  - stuff4ben 4y ago
    It was something like 6 payments at 0% interest so I took advantage of it. It was just offered as a payment option on the Amazon link. I'm seeing that now for condos I'm looking at renting next year too. While I can pay cash up front or just put on my credit card, I'd rather it sit and generate whatever small amount of interest and just use this to pay off my vacation over a few months with no interest.

EddieDante 4y ago

I miss layaway, and TBH I wish we had layaway for big-ticket items like houses, cars, and POWER9 workstations.

dhosek 4y ago
I never really got the point of layaway. I give you money and you keep it interest-free until I pay for the item? Why not just put it into my own savings account and at least get interest on it?
- fknorangesite 4y ago
  > Why not just put it into my own savings account and at least get interest on it? Because if it's immediately available in a savings account, the vast majority of people are much more likely to spend it on something else. The appeal of layaway is the willpower enforcement - worth the price of whatever pocket change you're likely to get in savings-account interest.
- EddieDante 4y ago
  For me, the point of layaway is that I want something enough to commit to paying for it in advance a little at a time. A savings accounts is fungible; it isn't necessarily dedicated to anything and subject to me raiding it if I need to cover an unexpected expense. Incidentally, where do you live that the interest on a mere savings account is worthwhile on a timescale of years rather than decades or centuries? Or am I taking "savings account" too literally when you mean things like certificates of deposit or money-market accounts?
  - lotsofpulp 4y ago
    > For me, the point of layaway is that I want something enough to commit to paying for it in advance a little at a time. A savings accounts is fungible; it isn't necessarily dedicated to anything and subject to me raiding it if I need to cover an unexpected expense. You are making dhosek’s argument for them.