Coming up with the cash to buy new furniture can feel like a daunting task, especially if you’ve just moved into a new home. After all, according to HomeGuide, the average cost to furnish a three-bedroom home ranges from $10,000 to $40,000.
Luckily, many furniture stores offer in-store financing options that allow you to purchase your new furniture in installments. The second option is to take out a personal loan. Personal loans usually have lower interest rates than financing offered by furniture stores.
How furniture financing works
With a furniture loan, you take out a loan to cover the purchase price of your new furniture. With a furniture loan, you don’t have to pay the full amount when you get your furniture home. Instead, you can spread the payments over time.
The most common ways to finance a furniture purchase are personal loans and in-store financing, and this table highlights some of the key differences between these two financing options.
| Storefront financing | Personal Loans | |
|---|---|---|
| Annual rate | Up to 29.99% if not repaid during promotional period | 8% to 36% depending on the lender |
| Is there an interest-free period? | Yes | no |
| Loan Terms | Various | Usually 1 to 7 years |
| Credit Requirements | Good credit may not be necessary, as the loan will be secured by the furniture. | You need good credit to qualify for the lowest interest rates |
| Do I need collateral? | Furniture can be used as collateral for a loan | no |
Interest-free in-store furniture loans
Even if a store advertises a 0 percent interest rate, the loan isn’t completely interest-free: There will still be interest on the loan, but if you strictly follow the terms of the loan, you’ll be exempt from paying interest.
This means you have to make your monthly payments on time and pay off the loan within the promotional period, which usually lasts between six months and three years.
If you miss a payment or don’t pay off your loan on time, you’ll be charged the full amount of any late interest that was previously waived. For example, if $400 in interest was waived during your interest-free period and you don’t pay off your loan in full before the promotion expires, you’ll be owed $400 in late interest.
Interest rates on this type of loan can be as high as 29.99%, which is on par with rates on personal loans for bad credit and average retail credit cards, the latter of which had an average interest rate of 30.45% as of September 2024.
advantage
- Potentially interest-free: The main benefit is that you can get financing to buy expensive furniture without paying interest.
- High interest rates: When you end up paying interest, the interest rate can reach nearly 30 percent.
Cons
- May not be interest-free: If you don’t repay your loan in full or miss a payment during the interest-free period, you may have to pay late interest.
- High interest rates: If you miss payments or don’t meet the terms, interest rates can reach nearly 30%.
Furniture personal loan
Personal loans are available through traditional banks, credit unions, and private lenders. Once approved, you receive the funds in a lump sum to use however you like.
The amount borrowed is repaid in equal monthly installments over a set period, usually between one and seven years, which is longer than the typical in-store promotional period. You will have to pay interest on a personal loan. However, unlike in-store loans, the interest rate on a personal loan depends on your credit score. If you have excellent credit, your interest rate could be in the single digits.
Before you start shopping, we recommend getting pre-qualified. This won’t hurt your credit score and will let you know the loan amount and interest rate you’ll qualify for. The average personal loan interest rate today is just over 12 percent, but you may need a credit score above 640 to qualify for such a rate.
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How to Get the Best Loan for Furniture
Researching your financing options beforehand may help you find the best way to pay for your new furniture.
- Weigh the pros and cons of storefront financing vs. personal loans. Calculate your monthly payments for each option to see if they fit your budget.
- Consider fees and interest: Consider the interest and fees for each option and be realistic when determining whether you’ll be able to pay off the in-store loan by the end of the promotional period.
- Don’t settle for the first offer you’re presented with. Check out the options available at other stores and with other lenders to get the best offer available.
- Check out our long-term promotional periods: If you choose in-store financing, look for retailers that offer programs with extended promotional periods so you have enough time to pay off your balance before interest accrues.
- Explore options for bad credit: If your credit isn’t great, consider bad credit loan options. Some lenders offer more competitive interest rates and lower fees than storefront financing options.
How to pay for furniture
Using in-store financing or a personal loan isn’t the only way to pay for furniture.
- Buy now, pay later (BNPL): Services like Afterpay and Klarna partner with retailers to offer payment plans. Some BNPL plans are interest-free, while others have interest but no late or unexpected fees.
- Credit card: You may be able to get a credit card with 0 percent interest for a certain period of time. If you don’t pay the balance after the promotional period, you will be charged interest on the remaining balance.
- Rental purchase and in-store pick-up: This is another option for people with bad credit. You pay to rent the furniture and then pay until it’s paid off. However, the interest rate for this method is usually higher. Some furniture stores also offer layaway plans for a fee, but you can’t take the furniture home until it’s paid off.
- Buy second hand: Thrift stores and consignment shops often have slightly used furniture for sale at prices significantly lower than new furniture.
- Borrow money from friends: Borrowing from family and friends can be an interest-free option, but be sure you both agree to a payment plan to avoid damaging your relationship.
- hang on: Buying new furniture is great, but if you’re struggling financially, consider waiting until you have saved up enough money to pay for it in full. Budgeting for your purchases will pay off in the future.
Conclusion
Buying furniture can be expensive, so choosing to make monthly payments using a personal loan or in-store financing may ease the strain on your budget.
Before you head to the furniture store, research all your options and choose the payment method that best suits your financial situation. If you choose a personal loan, compare interest rates, terms, and fees from multiple lenders to find the best deal for your financial situation.
