Cyber shopping season is in full swing, but have you noticed anything different when you click to check out? A growing number of major retailers are offering shoppers instant loans for consumer purchases.
These days, consumers are buying pretty big purchases online, everything from couture fashion to mattresses and sofas. It can be tough to click and buy if your bank account is less than chock full. Now, you can get an instant loan right at checkout.
“Our first goal is to reinvent credit,” says Julie Ingle, Head of Marketing at Affirm, one of several companies that now offer the instant shopping loans, also called ‘point of sale loans.’
Ingle says the payment plans are different than credit card options. “We don’t charge late fees; we don’t charge deferred interest; we don’t charge compounding interest. So, it’s a simple interest product,” she adds.
Each lender may be a speck different, but typically: You give basic information, decide the length of the loan –usually anywhere from three to twenty-four months --- and in less than a minute you’ll know if you’re approved.
“What we’re talking about is actual installment loans where you’re given an interest rate that’s typically set and you’re paying set payments over time,” says NerdWallet’s Liz Weston.
Weston says before you decide whether a loan is right for you: know the interest rate, know who to turn to for returns, whether there is purchase protection on purchases, and find out if applying will ding your credit.
Ingle says her loans can actually do the opposite. “You actually are bidding, building more history and more of a credit profile”, because the company reports your on-time payments to at least one of the credit bureaus, she says.
No matter what, Weston stresses, don’t feel rushed. There is no line behind you at an online checkout, she says, adding, “So, take a minute, pause, and do some research so you understand what you’re getting into.”
Weston says it’s also important to note that for some of these loans you are required to give a down payment via debit card. She says that cards backed by credit card companies offer the most protection for online purchases.
One other note: Affirm also has a new app. If you want a loan and you don’t see it offered at your favorite retailer—you can get a set amount of money to spend on a virtual credit card for a short amount of time at a designated store