How to Find a Good Deal on Furniture Financing?

By on February 1st, 2019

how to finance furniture
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Furniture financing can help you style your whole room today and pay for it later. It is a perfect option for people who want to furnish their homes despite the tight budget.

In this article, we will look for easy furniture financing options, the best ways to apply to them and what to pay attention to when financing your furniture.

Who Needs Furniture Financing the Most?

Millennials – people born between the 1980s and the 1990s – usually want fun vacations, designer bags and furniture of high quality. However, mortgages, student loan debt, and car payments don’t let them pay for such purposes.

In 2017, the National Endowment for Financial Education and George Washington University has conducted research on this topic. It shows that 59% of millennials carry student debt. Over 70% pay mortgage for their homes. They go further and further into debt. What should such a millennial do when he or she wants to furnish a new house? Many of them are choosing furniture stores with easy credit approval. Even with a low credit score, they can get financing at some furniture retail outlets.

Mandi Woodruff is an executive editor of Magnify Money. She says that many people chose financing to save their money. Yet, they also risk signing a bad financing deal. You should be really cautious.

The Main Six Ways to Finance Furniture

Let’s discuss the six most popular ways of financing furniture. Depending on what you want to buy and your personal finances, not every option is right for you.

  1. In-Store Financing

Many furniture financing companies are ready to provide you with the desired furniture pieces. It is simple to sign up for them. Some of them propose loans with an introductory rate of 0% APR during the first 12 to 24 months. If you are able to repay such a loan before that period ends, such an option might be a perfect deal for you.

Yet, some of such deals include a deferred interest clause. What does it mean? If you are not capable of repaying the loan until the promotional period ends, the interest you would’ve had to pay will be added to your loan. The interest on these loans is usually between 20-30%, so it can skyrocket.

  1. Rent-to-Own Stores

Such stores let you rent a piece of furniture and return it whenever you want without charging a cent. This is mostly no credit check furniture financing. The service is similar to loans with no credit checks. It could be perfect if you need some piece of furniture for a definite period– like a huge TV for a yearly Super Bowl party or an additional bed for your relatives’ visit.

What is the disadvantage? If you rent furniture for the long term, you can pay more than this item costs, even several times more. Some rent-to-own stores can charge you with a fee if you decide to own the item when the rental period is over. But not every store does like that.

  1. Personal Loans

Personal loans are a good choice for those who don’t want to turn to a furniture store with financing. To catch the best personal loan deal, you should have a high credit score a low debt-to-income ratio. As a rule, personal loans online start at $2,000 and can reach $50,000. Yet, some lenders offer $1,000 and other $100,000.

Interest rates range from 6% to 36% and terms range from 3 to 5 years. It is less risky if you are not able to use the 0% interest rate deal. If you find a lender who does not charge a prepayment penalty, you can pay it back early and save on interest.

  1. Layaway

Layaway is the second option for furniture financing near me. You don’t have to take the furniture home and pay it off together with the interest. You can just reserve furniture and let it stay in the shop until you are able to repay it in installments.

You will not have to pay interest. Nevertheless, it has some downsides anyway. You will have to make a payment before starting to make installments. Other stores might charge you with a one-time fee without waiting for your first payment. If you decide on another option, the majority of stores charges colossal cancellation fees.

Additionally, if the chosen piece of furniture goes on sale at the time you are repaying it, you have no right to take advantage of it.

  1. Home Equity Loans

With home equity loans, you borrow against the equity amount in your home. Such loan is backed by collateral (your home), so lenders are more willing to propose low-interest rates and more favorable terms than unsecured personal loan lenders do. It can be a better option for those seeking bad credit furniture financing.

If you have recently bought a new house or flat, I might not have built enough equity to borrow from. However, if you are unable to repay such a loan in time, you risk losing your home.

  1. Credit Cards

furniture financing credit card
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This furniture financing might be useful in two cases:

  • You are buying small items
  • You want to use 0% financing.

It is convenient to use your credit card for small purchases and pay it off fast.

For large-scale purchases, try to sign up for a new credit card with a 0% promotional period that doesn’t include a deferred interest clause. It will prevent you from paying extra interest if you don’t do a timely payment.

Pitfalls to Avoid When Financing Furniture

It is not that easy to find guaranteed furniture financing. And even if you find it, you should assure that it will not damage your credit score.

Watch out for the following red flags:

  • Zero-percent financing: If you choose this option, be sure to fully repay it in the allotted time. If you don’t, you will pay the back interest you’d have paid normally.
  • Consumer financing loans: Such loans are reserved for borrowers with excellent credit. If you take them out too many times, they can badly hurt your credit.
  • A revolving credit account can quickly reduce your credit score and hurt your debt-to-credit ratio.
  • Furniture stores with financing for bad credit sometimes have alternative options for those who don’t qualify for furniture financing. They can propose alternative financing agreements. Those options often come from another bank that may propose a bad deal. Such an agreement is often not a good alternative.

Where Do We Go from Here?

The following step in the trip to getting the desired furniture is yours alone. Only you can take the information we provided you with and choose your course of action as to how you want to buy the desired pieces of furniture without making additional payments and piling debts.

To do this, analyze your current financial situation.

  1. How much money do you have as of today?
  2. Can you afford to get extra debt? You should carefully evaluate your monthly budget of today and the future. Consider the impact on your credit score before using furniture financing bad credit.
  3. Is your credit score good? Do you have a chance to get a low-interest rate?
  4. If you want to try bad credit furniture financing online, do you have collateral to back it by? Are you able to borrow wisely without losing your assets?

You should take all these questions into account before reaching an informed decision.

After this, choose what option fits your specific criteria. It is not simple. But if you do it in a correct way, you will purchase the desired furniture and your financial future will be more secure.