If you’re just moving into a new home, you may not have the extra cash to pay for new furniture after you pay for down payment and travel expenses. According to HomeGuide, the average cost of offering a three-bedroom home ranges from $10,000 to $40,000.
Many furniture stores offer in-store financing options that offer customers a new way of paying for furniture over time with special benefits such as postponed interest and price discounts. Alternatively, you can take out a personal loan that usually has a lower interest rate than your store’s funding.
Furniture Financing System
Furniture funding involves making loans to purchase new furniture. You can leave your savings intact and spread your payments over time.
The two most common ways to finance furniture are personal loans and in-store funding. This table highlights some important differences between these two funding options.
| In-store fundraising | Personal loan | |
|---|---|---|
| Annual rate | Up to 29.99% if you are not rewarded during the promotion period | 6.5% to 36%, depending on the lender |
| Interest-free period? | Possible | no |
| Loan terms | It will change | Usually 1-7 years |
| Credit Requirements | The loan is protected by furniture so you may not need good credit | Good credit required to qualify for the lowest rate |
| Do I need collateral? | Furniture can be used as collateral to secure a loan | no |
No furniture loans in the store
There is always a catch when a store promotes 0% interest rates. In most cases, interest will be accrued, but if you pay off the loan within the introductory period, you will be exempt from six months to three years.
However, if you miss a payment or don’t repay the loan in time, you will be charged against all previously exempted interest. The APR for in-store furniture loans can be close to 30%, which is equivalent to a personal loan for bad credit or average retail credit card rate.
Personal loans for furniture
Personal loans can be used through traditional banks, credit unions, and private lenders. They can be approved promptly and in some cases the funds are available on the day you apply. You will receive funds in a lump sum payment and repay the balance and interest from your equal monthly installments over a set period.
Interest rates on personal loans range from 6.5 to 36%, depending on your creditworthiness. A good credit score can earn single digit rates. Pay attention to the origination fee. Some personal loan lenders will charge 12% of the loan amount.
How to get the best loan for your furniture
It is best to get prequalified before you start shopping. Prequalification will not hurt your score and will give you the idea of fees, periods and payments you can expect.
By researching your fundraising options in advance, you can discover the best ways to pay for new furniture.
- Compare and consider the costs of in-store financing for personal loans. Calculate monthly payments using each method, review your budget and understand if you can afford it reasonably well.
- Fee factors. Check in-store promotions to see if the fees will be added to your loan balance. If you choose a personal loan, add a fee cost to ensure that you don’t run out of furniture prices.
- Don’t settle for the first offer you get. Check out the options available along with other stores and other lenders to ensure you have the best offers available.
- Check for a long promotion period. If you choose to raise money in the store, find a retailer who offers programs for extended promotional periods. This increases your chances of repaying your balance before interest begins.
- Explore bad credit options. If your credit is not in the best form, consider the bad credit loan options. Some lenders may offer more competitive interest rates and lower rates than in-store financing options.
Other ways to pay for furniture
In-store financing and using personal loans are not the only options for furniture payments.
- Buy Now, Pay Later (BNPL): Services like Afterpay and Klarna partner with retailers to provide payment plans. I’m not interested in some BNPL plans, but I have to stick to my payment schedule. Many apps split the purchases four times, splitting the equivalents every two weeks.
- Credit Card: You may be able to use your credit card at an interest rate of 0% during the set period. If you have not repaid your balance after the promotion period, you will be charged interest on the remaining amount. Don’t forget: Carrying your credit card balance can cause your credit score to tank.
- Rent and in-store layout: Using this option, you will pay the furniture rental price until you pay the furniture off. The interest rates associated with these options are very high and do not build credits. Some furniture stores offer laneway plans for a fee, but you cannot take your furniture home.
- Shop second hand items: Thrift stores and consignment stores often use furniture gently at a much lower price than they would pay for new pieces.
- Borrowing money from a friend: This is a great way to save interest if you have friends and family who can lend you money and are willing to lend you. However, make sure you are on the same page about repayment expectations to avoid damage to the relationship.
- hang on: Paying cash for your purchase is always the best. If your fundraising furniture adds too much debt to your monthly budget, consider setting up a sinking fund account instead. You can allocate a monthly amount set for your goal until you save enough to pay in cash.
Conclusion
Spreading the cost of furniture over time can help ease the burden of your budget while filling each room with a room that suits your lifestyle. Always shop special sales and discounts, whether you fund your furniture or pay cash.
Before visiting a furniture store, calculate numbers to determine a reasonable monthly budget. If you choose a personal loan, compare prices, conditions and fees across multiple lenders before applying to ensure that you do not undermine your credit with strict enquiries.
