New buy now, pay later launches in the UK to rival Klarna, Clearpay and PayPal – how does it compare?
A MAJOR US buy now, pay later firm has launched in the UK in a bid to rival big brands Klarna and ClearPay.
Affirm offers a buy now pay later (BNPL) service alternative to credit cards.
This enables customers to spread the cost of items bought online and in shops across several payments.
Affirm will let users pay in instalments such as six, nine or 12 months.
This could be helpful if customers are making a big-ticket purchase such as a sofa or fridge.
The Average Purchase Rate (APR), which refers to the total cost of borrowing for a year, will vary depending on your purchase.
For example, a £900 purchase may cost £75 a month for 12 months and have an APR of 22%.
Affirm does not charge fees for customers who do not make payments on time, unlike other BNPL firms.
Shoppers will also be assessed on whether they can repay before their purchase is approved.
Affirm was founded in 2012 by Max Levchin, who co-founded PayPal.
The company now has more than 18 million active customers in the US, which makes it one of the biggest BNPL lenders in the country.
It currently partners with around 300,000 retailers worldwide including eBay, Apple and Amazon.
BNPL grew in popularity during the Covid-19 pandemic as customers turned to online shopping and wanted more flexible payment options because of the cost of living.
Companies including Klarna and ClearPay already offer BNPL in the UK, as do banks such as HSBC, NatWest and Monzo.
But shoppers have previously been warned that it’s easy to rack up debt using these services, and you can incur high charges if you don’t meet the repayments.
How will Affirm work?
To use the service simply select Affirm at the checkout and enter a few details for an in the moment decision.
How to get free debt help
There are several groups which can help you with your problem debts for free.
- Citizens Advice – 0800 144 8848 (England) / 0800 702 2020 (Wales)
- StepChange – 0800138 1111
- National Debtline – 0808 808 4000
- Debt Advice Foundation – 0800 043 4050
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
Speak to one of these organisations – don’t be tempted to use a claims management firm.
They say they can write off lots of your debt in return for a large upfront fee.
But there are other options where you don’t need to pay.
Checking if you qualify for an Affirm fixed sum loan will not affect your credit rating.
The company has a minimum spend, which may vary from time to time.
It has not confirmed what this will be in the UK.
You can also set up AutoPay to ensure you do not miss a repayment.
Customers will be able to manage their account and see their purchase history online.
Martyn James, a consumer champion, said: “We can only compare the US version of Affirm at the moment, but if it follows the same model, it’s pretty much identical to the big BNPL companies in the UK.
“The business offers both interest bearing credit (regulated) in the US and a 4 payment interest free version.”
How does its service compare?
Affirm does not charge late fees for customers who do not make payments on time, unlike rivals Klarna and ClearPay.
Klarna charges a late fee of around £5.
At ClearPay there is an initial £6 late fee if an instalment is not paid on or before its due date.
A further £6 late fee will apply if a payment is still unpaid seven days after the due date.
Late fees are capped at £24, or 25% of the order value, whichever is less.
Meanwhile, PayPal charges a hefty late fee of £12 for overdue payments.
Andrew Hagger, founder of personal finance website Money Comms, said: “Affirm’s main difference appears to be that at launch it won’t be charging late payment fees like Klarna and Clearpay – this is obviously a positive for consumers.”
Affirm will also assess shoppers on whether they can repay any money they borrow before their purchase is approved.
At Klarna each purchase a customer attempts generates a new automated approval decision, which is based on current credit data, regardless of past approvals or rejections.
A rejection will not negatively impact your credit score.
ClearPay also performs pre-authorisation checks on your credit or debit card before you can use it to make a purchase to ensure you can pay it back.
What happens if you miss a payment?
Affirm said that failing to make your minimum payment could affect your credit rating.
The industry is not regulated which means borrowers using BNPL do not have access to some of the protections provided by other consumer credit products such as credit cards.
But new rules which are set to come into force in 2026 will mean that BNPL companies will have to check that shoppers can afford repayments before they are given a loan.
This will help to prevent people from building up unmanageable debt.
Companies will also need to provide clear, simple and accessible information about loan agreements before a customer applies for one.
This will allow customers to make informed decisions and understand the risks of making a payment late.
BNPL customers will also be given stronger rights if a problem arises with products they have bought, making it quicker and easier to get compensation.
This will include Section 75 of the Consumer Credit Act, which allows customers to get a refund from their lender.
They will also be able to use the Financial Ombudsman Service to make a complaint.
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