Should Customers Finance Their Next Holiday – Case: ‘Airfordable’ Airfare Financing

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Most people experience at some point in life a period where they are short on funds and still have the desire or need to book a flight somewhere which now can be done using a new financing service called Airfordable.

Travel Financing

 

Airfordable doesn’t work like a regular financing that is usually done by a bank or banking affiliate which run credit checks and open individual accounts.

When I came across this I was curious and decided to have a look at it because I’m automatically cautious when something sounds too good or too easy to be true.

You can access the Airfordable website here.

Airfordable

So once you enter the website you ask yourself ‘How does this work?’ and their relevant section (see here) tries answer that question somewhat.

Probably an elementary part is: To be eligible to use the service, you must be at least 18 years old and a resident of the United States.

How to do?You pull up your flights from a travel provider website (they accept Priceline, Orbitz, Google Flights, Expedia, as well as any airline website) and take a screenshot of your flights that includes the flight and pricing details.

Afterwards you fill in a form on the website that includes your routing and the price. The service then calculates the service fee and individual payments offered to you.

Financing Quote.jpgMy ticket cost was 475 USD equivalent (I used a screenshot from the Malaysia Airlines website) and then the system ran the calculation and offered to finance this ticket for an immediate down payment of 175,75$ and six payments of 60.17$ every two weeks. This includes a one time service fee of 61.75$ which represents a total of 12,7% fee for the entire ticket which is paid over 3 months.

There is no option of selecting that you pay once a month even if you’d prefer to pay double. This is a bit annoying as I don’t see the point of making a payment every two weeks. A confirmation and e-ticket will be delivered after the last payment.

Now we get into the tricky part. Keep in mind that the above mentioned 12,7% are for the 3 months period only. If you consider that the year has 12 months the APR is actually much much higher and Airfordable also states that the fees can reach of to 20% of the ticket costs. 20% fee would translate into an out of the world 80% APR. This is equivalent to the infamous payday loans and not comparable to a reputable financing like consumer loans or a credit card which probably has a maximum of 24% APR.

Keeping in mind however that this transaction is not subject to a credit check and Airfordable isn’t a financial institution the company needs some form of leverage to balance the risk they take in loaning to unknown consumers. Another unique thing is that through this service you make your entire payment ‘before’ you take your flight and not continue to make payments after your trip has ended. The reason is simple: If you don’t pay your installments as scheduled you won’t be able to take your flight which leads to much less cases of people walking away from their debt.

One might ask ‘How is this different to me just saving the money at home and avoiding the service altogether?’. Simple answer to this is that you’re able to lock in the fare for the price currently available which might save a lot of money if you can be certain that it will go up until the date of your departure.

What are the drawbacks?

I would like to know how Airfordable is able to secure my fare for 3 months or if it is purchased right away and they just withhold your ticket information (which you could always get from the airline by calling)? Another matter is that some airlines do require credit card verification at check-in and you might run into trouble if the booking is made through the airlines website and not an Online Travel Agent (OTA) or a brick and mortar agency.

The other thing is that the verification process might well be declined and takes up to 24 hours. Should Airfordable decline the financing or the fare disappears you stand in the rain with empty hands. Since the down payment is due immediately you will also have to wait until the refund is processed which can make a difference for people who are already short on funds.

I made one request for a flight Bangkok to Beijing and return from Tokyo (one of the great Malaysia Airlines Business Class Fares we wrote about). Before that I even contacted one of the support staff to request details so even though it would have been a waste of money since I used my regular credit card I wanted to try it just for the sake of it. Turned out I shouldn’t have worried as it was denied anyway.

Airfordable Denial

The support staff said it was denied because the flight has to start in the U.S. – something I explicitly asked about before requesting it and which the Terms&Conditions don’t specify. Now they have to refund the down payment to my Visa card, let’s see how long that’s gonna take!

As far as the fee goes I don’t find it to be that expensive to pay 61$ for 3 months (20$ a month) to secure a really good fare. If you are looking to save on the fee and have a credit score that allows you to get a consumer or PayPal credit then maybe financing the traditional way would be a better choice especially if you can secure an offer like x months interest free.

Another thing I don’t like is that there is an absolute lack of regulation and I can’t find any source how the funds you give the company in advance of your flight are secured (likely they aren’t).

Conclusion

It’s always good to see new products and ideas on the market, especially those that think outside of the box and make alternative options available for those that can’t rely on the traditional means of financing something either due to lack of a credit card, credit score or not having the necessary data to apply for credit such as a U.S. social security number. They have to sort out these kinks though and make a clear description about what is actually eligible to book.

I think this is a better solution than traveling on credit especially when it’s not an emergency. I don’t believe in getting into debt for luxuries such as consumer items or vacations because the satisfaction with these things doesn’t last very long and you have the burden of debt well after you had your moments of joy.

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