Before you start using Affirm or Klarna it is important to fully understand how the two payment services work, especially what costs or fees might be involved.
In this review we’ll compare both services and tell you the differences.
What are the key differences?
Affirm is a short term lender which allows you to spread the cost of your purchases over a fixed period of 3 – 36 months. Similar to a traditional credit financing the service allows you to pay off your short term loan in multiple instalments.
Klarna on the other hand are best known for their ‘try before you buy’ model of payment which lets you pay 14 or 30 days after your order is shipped. This has become increasingly popular for clothes shoppers who wish to try on purchases before paying.
More recently Klarna has introduced their own consumer financing product. Similar to Affirm, the Swedish company allows you to finance larger purchases and pay in instalments of between 6-36 months.
Both companies are competing head on in the short term lending market, however Klarna also offers interest-free payment options if you pay in 30 days are spread the cost over 4 separate payments.
Comparing costs and fees
The first rule of using either Klarna or Affirm is to be fully aware of the potential costs or fees of your purchases. We’ve compiled the need to know costs for both services below.
|Best Known For||Short term financing between 3-36 months||Interest free 30 day payments|
|Good For||Spreading the cost of larger purchases||Try before you buy payments on items such as clothing|
|Interest Rate||0 – 30%||0% for 30 day payments|
19% for financing over 6 months
|Payback Period||Short term financing of 3, 6, 12, 18, 24 and 36 months||Pay in 14 – 30 days|
4 instalments over 6 weeks
Short term financing between 6-36 months
|Fees||No Late Payment Fees||No late payment fees on interest-free products|
$35 late payment fees on monthly financing products
|Credit Check||Soft Check||Soft Check for interest free products|
Hard Check for monthly financing products
|Number of Retailers||Over 3000 merchants||Over 190,000 retailers in 17 countries|
Do both services do credit checks?
Depending on they type of financing you choose will impact on whether a soft or full credit check is performed. Affirm carries out a ‘soft’ credit check for all purchases made.
Klarna perform ‘soft’ checks on their interest free products but ‘hard’ credit checks if you are financing over a 6 month period.
Does a hard credit check affect my credit score?
Yes, a hard credit check also known as a ‘full’ credit check may impact your credit score. You can expect your credit score to drop between 5-10 points if a hard check is done against your name.
We recommend keeping hard credit checks to a minimum and only using them for credit purchases on large lines of credits such as car financing or mortgages.
To avoid a hard check use Affirm for any financing over 3 months. Paying on time can also help build a positive credit history.
Return or cancellation policies
A common question is, can I return my purchases made with Affirm or Klarna? Both services offer refunds and cancellations, however you may be charged interest even if the retailer offers a full refund.
Affirm does not refund any paid interest on short term financing. This is something to be aware of when purchasing. We recommend contacting the retailer as soon as you need to return to avoid paying interest. Affirm will return the principal amount between 3-10 business days after the retailer has confirmed a refund.
Klarna offers a full refund if using any of their interest-free payment options. Full refunds must be issued first by the retailer. Make sure you get in contact with the merchant as soon as you can.
So which is best Klarna or Affirm?
While both services have overlapping products the right service depends on the type of purchase you are making. We recommend using Affirm for larger purchases where you want to spread the cost over 3 months as you can benefit from interest rates as low as 0% without impacting your credit score.
If you are purchasing anything under $200 then we recommend Klarna’s interest-free options as you can spread the costs and delay payment until you are completely happy with your purchase.
If you have used either Affirm or Klarna we would love to hear your thoughts in the comments below.