Consumer Watch: High interest rate loans
OKLAHOMA CITY (KOKH) —
Access to small loans without a hard credit check is growing. Though it may seem to make life easier, financial experts have a warning.
You've likely noticed the option while shopping online. The most popular of these kinds of lenders is Affirm.
Affirm is different from a credit card in a few ways.
-It is a onetime loan for a purchase.
-Affirm pays the company you are trying to buy from-- directly.
- You can choose how you will pay the money back: three months, six months, or a year.
When it comes to any kind of loan, financial experts ask consumers to be cautious of the interest rate.
“The big print giveth and the fine print taketh away,” says Jennifer Wallis, with the Oklahoma Jumpstart Coalition.
Affirm does not do a credit check, but their own program will decide how much you are approved for, and what your interest rate will be-- between 10 percent--which is good-- and 30 percent-- which is not.
If you are approved for a loan, but have a high interest rate, and choose a one year pay off, Wallis says you should reconsider.
“You might feel like you need something, but it might just be something that you want that you could put off instead of paying for those high interest accounts,” says Wallis.
Small loans like this are often used for slightly out of reach buys, like furniture, but have recently been made more available for jewelry buys, sports equipment, and even clothing.
Other types of store specific financing have some catches. If you have an interest free loan, but don't pay it off in the allotted time, you will have to go back and pay interest on the full life of the loan, which can be hundreds of dollars more than you expected to pay.