Hey readers! Are you considering using "buy now, pay later" financing from Klarna or Affirm for your next online purchase? If so, you’ve likely wondered – how exactly do these two popular services compare?
I‘ve analyzed them in-depth. As a payments industry insider, I‘ll walk you through everything you need to know to pick which option truly works best for YOUR situation.
So whether you‘re looking to split costs on a pricey product or take home your items first before paying, read on for my full breakdown!
An Insider Look at the Buy Now, Pay Later Explosion
First – what even is BNPL? It stands for "buy now, pay later". BNPL plans let shoppers purchase goods immediately but spread repayment over interest-free installments.
This concept isn’t entirely new – layaway programs date back over a century. However, financial technology (fintech) startups like Klarna and Affirm have supercharged the model for today‘s world.
Powerful mobile apps and seamless integration with major retail sites helped BNPL consumption skyrocket 210% in just the past two years.
With consumers flocking to these flexible spending options, major players enjoyed meteoric rises:
- Klarna recently reached a valuation of over $45 billion.
- Meanwhile, Affirm went public in 2021 at an $11 billion market cap.
But how exactly do these two fintech juggernauts compare when it comes head to head? Let‘s break it down next.
Klarna vs. Affirm Feature Comparison
Klarna and Affirm share the same basic buy now, pay later premise. However, within their product suites some noticeable differences emerge upon closer inspection:
||Klarna |Affirm|
|— |— |— |
|Flagship BNPL Offering| Pay in 4
(4 interest-free installments)|Pay in 4
(4 interest-free installments)|
|Added Flexibility|Pay in 30 Days
(Try before you buy)|-|
|Financing Term Length|Up to 36 months |Up to 48 months|
|Savings Account|Yes – but only in select countries|Yes – in all markets|
|Avg. APR on Loans|0% to 29.9%|0% to 36%|
|Late Payment Fees?|Yes
$7 or 25% of missed payment|No|
Based on this overview, Affirm clearly comes out ahead for anyone wanting longer repayment periods or the ability to grow savings.
On the other hand, Klarna offers unique flexibility with Pay in 30 days – allowing free product trials before purchsing. Plus, their lower average interest rates help keep borrowing costs in check.
Next let‘s compare availability in different geographic regions.
Global Reach – Klarna Leads Affirm Significantly
Part of Klarna’s appeal comes from its expansive reach across continents – the service is currently available in 18 different countries:
| Country | Active Klarna Users | Year Launched |
|---|---|---|
| Sweden | 7 million | 2005 |
| United Kingdom | 17 million | 2014 |
| Germany | 15 million | 2014 |
| United States | 34 million | 2015 |
| Australia | 6 million | 2016 |
In Affirm’s home country – the United States – Klarna has already racked up 34 million customers alone as of February 2023!
Unfortunately, Affirm only operates right now in the U.S., Canada and Australia. So if you live almost anywhere else in the world, Klarna will be your better BNPL bet today.
Next let‘s look at how high-dollar amounts you can finance differs.
Affirm Offers Over 17X Higher Purchase Limits
One area Affirm really pulls ahead of Klarna is accommodating larger, pricier items. Just have a look:
||Minimum Purchase |Maximum Purchase|
|-|-|-|
|Klarna |$35 |$1,000 |
|Affirm|$50|$17,500|
As you can see, Affirm allows purchases about 17 times greater than Klarna‘s $1,000 cutoff in max spending power.
So if you want BNPL when buying that dream laptop, designer couch, or big-screen TV – Affirm has you covered. Just be careful not to overextend yourselfbudget-wise with all that high limit flexibility!
On the flip side, Klarna’s lower threshold makes it a safer tool for managing everyday essentials. Let’s now examine the costs of falling behind on payments.
Late Repayment Fees Vary Greatly
Missed installment payments should always be avoided. But accidents happen amid busy life – so understanding late fee policies matters when comparing Klarna and Affirm.
If you pay past due with Klarna, penalty costs hit either $7 or a steep 25% of the missed amount. However, Affirm charges no late payment fees at all!
The tradeoff? If you don’t settle debts owed to Affirm, you can’t use their service again until resolving that balance. Plus, credit score damage from reporting could occur.
So weigh whether you’d rather risk fees from Klarna, or credit/account impacts if struggling to repay Affirm on time.
For longer-term financing, interest charges are also lower with Klarna…
Klarna APR Rates Range 7% Less Than Affirm
If you need a multi-year loan to afford something expensive, interest charges will eventually accrue with both services.
Klarna provides a little more annual percentage rate (APR) savings versus Affirm – 0% to 29.9% compared to 0% to 36%.
Let‘s see the dollar difference in a real financing example:
- Imagine you buy $5,000 worth of new living room furniture
- You choose a 24 month payment term to afford it
- Klarna gives you an 18% APR since your credit is just "average”
||Klarna|Affirm|
|-|-|-|
|APR |18%|36%|
|Monthly Payment| $239.76| $265.16|
|Total Interest Paid|$1,194.24| $1,643.84|
By going with Klarna in this scenario, you’d save $449 in interest charges! Now, onto eligibility rules for approval…
Soft Checks Aid Approval – But Beware Hard Inquiries!
For smaller purchase amounts, Klarna and Affirm approval mainly depends initially on:
- Your age – must be 18+ years old in country of residence
- Valid contact info like a working phone number and address
- Linking your bank account or debit/credit card for payments
The good news is both services generally run only a soft credit check first for smaller lines. These don‘t negatively impact your score!
However, financing above $1K or longer monthly terms may trigger intensified hard credit checks:
- These inquiries DO show on your reports if run by Klarna/Affirm.
- Too many hard checks from any lender can hamper your credit standing.
So while it‘s easy to get started with BNPL, borrow prudently! Don‘t take on debt exceeding your budget to avoid financing approval hurdles down the line.
Strong Encryption Technology Safeguards User Data
Rest assured – Klarna and Affirm leverage complex data protections you‘d expect from any top fintech:
- Secure socket layer (SSL) technology encrypts entered info
- Multi-factor authentication adds layers of identity verification
- Customer payment details are never viewable to retailers
In addition, Klarna provides further security guarantees rarely offered industry-wide:
If any monetary losses result from confirmed internal system failures, users are explicitly promised full reimbursement.
So both services store your information safely. But Klarna goes the extra mile backing that pledge financially!
Choosing the Right BNPL Service for YOU
Here’s what it really boils down to when deciding between utilizing Klarna vs. Affirm…
😃 Go with Affirm if you:
- Are purchasing in the U.S., Canada or Australia only
- Expect to finance items above $1,000
- Don’t want any late fee penalties
😃 Go with Klarna if you:
- Are shopping internationally outside North America
- Prefer 0% 30-day risk free trials before purchasing
- Want lower interest rates on long-term loans
- Can absorb some late fee charges if needed
Bottom line – let your unique situation and preferences steer you towards the best fit! With this comprehensive overview of features, costs, availability and more, you have all the tools to choose wisely.
I hope mapping out the Klarna vs. Affirm matchup in depth helps guide your financing decisions! Let me know if any other questions come up when deciding.
