Many U.S. consumers simply can’t afford to pay for vacation out of pocket.
Most Americans plan to spend about $941 per person to get away, according to American Express’ Spending & Saving Tracker. And 74 percent of people go into debt – on average, $1,108 – just to vacation, a study by LearnVest found.
Affirm, a financing company that has partnered with over 150 merchants including Expedia, claims to offer “easy financing—without a catch,” giving vacation dreamers another way to lock down their next big trip.
How Affirm Works
If you want to use Affirm to finance your next vacation, you log on to the Expedia site, book your travel, and make your way to the payment screen. Once on that page, you’ll find several tabs at the top of the Payment section (picture below).
If your trip qualifies for Affirm financing (we’ll get to that shortly), then you can select “Monthly Payments” and begin the application process by entering basic information (name, email, date of birth, and last four digits of your Social Security number).
Affirm will then run a soft credit check to determine approval. Approval relies on a variety of factors, but all applicants must meet the following requirements:
- Be at least 18 years old (19 in Alabama, or the applicant is a ward in Nebraska)
- Have a valid U.S. address
- Have a valid U.S. mobile number or VoIP
Though there are basic requirements for individual eligibility, as mentioned above, not all travel purchases are eligible for monthly payments through Affirm. For a trip to qualify for Affirm financing, the following prerequisites must be met.
- The booking must be for a hotel or a bundle deal (i.e., flights alone will not qualify)
- Travel must be deemed as “leisure” and not “business.”
- The booking must be eligible for Expedia+.
- The total cost of travel must be at least $200.
Assuming you meet all application and booking requirements, you can expect to pay anywhere from 10% to 30% APR with a repayment term of three, six, or 12 months.
While Affirm does not specifically state that they run hard credit inquiries, it should be noted that they do report to Experian (though they may report to more in the future), so financing your trip through Affirm can impact your credit score. The good news is that timely payments can positively impact your score; obviously, late payments can have an adverse effect.
How Affirm Compares to Personal Loans
Personal loans also represent another method of financing your vacation. In this case, you would apply for a loan in the desired amount, and if approved, make payments based on the terms and conditions set forth by the lender.
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For borrowers with great credit, interest rates may be, on average, as low as 4% to 6%, and loan terms are typically available between three months and seven years, though both of those depend on the lender and other factors including income, loan amount, etc. Conversely, those with poor credit may find it difficult to secure a personal loan, and if they do, they may pay interest rates as high as 35.99% when borrowing from top lenders.
Which is Better?
That depends on your own unique situation. If you have great credit, you may find a personal loan to be more affordable than it would be when compared to a minimum APR booked through Affirm. However, if you can’t get approved for a personal loan, or if you’re approved for an APR of 30% or more, then you may want to consider Affirm.
It’s also important to assess the fees associated with each. Affirm claims that they “don’t charge late fees, service fees, prepayment fees, or any other hidden fees,” whereas some (not all) personal loans come with additional fees, including origination fees (1% to 6%, on average) as well as late fees.
How Affirm Compares to Credit Cards
Many vacationers also turn to credit cards to finance their trips, which allows them to buy now and pay later while accruing interest as long as a balance remains on the card. Typically, the average credit card interest rate is around 16%, though rates for cardholders with bad credit may be around 23%, which is lower than the max APR offered by Affirm.
Which is Better?
Does it make sense to charge your vacation, or should you finance it through Affirm? Here are a few times when booking your travel via credit card may be a better idea:
- You’ve recently been approved for a 0% APR finance offer and you can pay off your vacation debt within the promotional period.
- The Affirm APR exceeds that of your current credit card rate.
- You regularly utilize a credit card rewards program, don’t carry a balance, and can gain significant points/miles by paying for travel with the card.
Vacations are beneficial, but they’re also expensive. Ideally, you should always try to save up for a vacation as opposed to financing one. However, if that’s not an option, then Affirm does present a reasonable means to make your travel dreams a reality. Before you book, consider your personal loan and credit card options, using available interest rates, repayment terms, and other considerations (like rewards points) before making your final decision.
Author: Jeff Gitlen
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