At least with the peloton purchase, it sounds like they are using Affirm. Generally if you have good credit, interest rate is zero. I've seen it on other high ticket items for sale online. In this case Affirm reduces the friction of buying higher priced products.

The phone I'm typing on now was financed through symphony credit. Zero interest, and 36 monthly installments. I'm sure there are penalties if I don't pay every month, but it's on auto pay.

That's not really what the article is talking about though.

That kind of loan is nothing new. My parents were buying furniture on zero-interest installment plans decades ago. They offer zero-interest financing as an incentive to buy.

The article is about installment plans replacing high interest payday loans, which is a whole other game.

How do they make money offering 0% financing on 36 month plans, let's say? Are they wagering that the cost of inflation/opportunity-cost of those dollars that the good people got is far outweighed by the benefits of people not paying on time? Seems wild that SO many of the customers wouldn't be able to pay on time...

I don't know - I have seen lots of zero interest offers - but never from Affirm. I have a 750+ credit score and last time I looked at Affirm for something (a glowforge I think), interest rates offered were above 21%!

They do, as I bought a Peloton using Affirm. I was ready to pay cash, but they offered to do an interest free, no fee loan thru Affirm and split it across a couple of years. So I did it, because why not?

I’m guessing this was probably an arrangement between Peloton and Affirm to where the former paid some fee to the latter, and all of that is absorbed as marketing overhead just to get more people buying bikes.

Correct any zero % rates are deals with the vendor. Affirm is just another predatory lender. Rates are sent to the user by who ever is giving the most kickback to affirm. Credit scores only give a yes/no on to next logic. My gf has just about zero credit history 690 and I am 790 we both get same offers at 18%

That you pay for via inflated prices and fat profit margins.

When the offer is $X now or $X/36 for 36 months, it's clear the seller is paying the financier, but that doesn't mean the seller will offer a discount for current payment.

Some do although, especially when you poke them about it. You see it often with cars where you offer all cash vs the %0 financing option, you can often get a discount that way. The $2000 in interest you were going to pay implicitly through the inflated price of the car goes away.

Sure, but as there were no full payment discounts, full cash buyers subsidized my payment plan.

When the interest rate is zero it is because if you make a mistake and miss a payment, the claws come out and the penalty rate is high enough not only to pay for servicing all the loans which earn no money but also earn a profit. There is no free money.