Finance 101

Furniture Financing – How to Finance Furniture?

October 27, 2023

It can be exciting to shop for new furniture! We may spend time wandering the stores, looking at fabrics, browsing online, and even placing a custom order to get exactly what we want.

But then it's time to pay.

Many of us get focused on selecting the furniture we want and don’t give as much thought to how to finance furniture. But buying furniture can be a big purchasing decision. Not everyone can save up the total cost before making the purchase.

Can you finance furniture? How does financing furniture work? It’s important to understand your options.

Thankfully, there are furniture financing options to fit every credit score and budget. In this article, we’ll look at the available options in detail, including those to avoid, and answer the questions “Is financing furniture a good idea” and “How does financing furniture work.”

Installment Loans for Financing Furniture

Personal loans are a convenient option to pay for a furniture purchase. Funds from a personal loan can be used on almost anything, so if you want a new ceiling fan or pillows to complement the new furniture, no problem.

Money from a personal loan like those at Check `n Go is often available within 24 hours, which can help if you’re trying to make a quick purchase during a sale. The application process is usually simple.

Also, personal loans are available to a wide range of credit scores, even for those with low or challenging credit. You’ll pay more than the cash price due to interest, but if you’re unable to save up the cash, a personal loan can help you get your furniture and pay a little at a time. Consistent on-time payments can even help improve your credit over time.

Are you wondering how to finance furniture with bad credit?

Apply For an Installment Loan

Finance Furniture with a Credit Card

Credit cards are another convenient option for buying furniture. They allow you to cover the cost almost instantly and pay all at once or over time.

A credit card can be a great option in some circumstances. If you’re able to get a 0% introductory rate, you won’t pay interest provided you pay before the end of the promo period. If you have a rewards card and intend to pay the entire purchase off at the end of the month, you can get rewards for your money, like airline tickets, without ever paying interest.

Of course, the best part of using a credit card is that it’s convenient, but it also provides a record of your purchase. Some cards even offer protections and warranties you otherwise don’t get.

There are drawbacks to using a card for your furniture purchase. If you don’t pay your purchase off at the end of the month (or the promotional period for 0% introductory offers), you could end up paying a high interest rate. This interest leaves you paying much more than the cost of the furniture. Also, low interest and 0% introductory rates are often available only to those with good or excellent credit.

Home Equity Loans for Financing Furniture

Another option for buying furniture is a home equity loan, sometimes referred to as a second mortgage. These are secured loans, which means you secure the loan with collateral – in this case your home.

The interest rate you can get with a home equity loan is usually a fixed rate that will depend on your credit, income, and home value. These loans usually offer flexible terms from 5 to 30 years, allowing you to choose what makes sense for your situation.

If you are already doing a renovation using a home equity loan, it may make sense to lump the cost of your furniture into the loan and pay it off over time with the rest of the work.

Home equity loans may also be a good option if you own a home but have low credit, since they allow you to use your home as collateral to help you get a lower interest rate. Just beware – this is only a good idea if you know you can make on-time payments for the life of the loan. Otherwise, the bank could seize your home.

It’s important to know that lenders will require you to bring cash to the table for closing costs when getting a home equity loan. There are often other fees associated with getting a new home equity loan, which can take from two weeks to two months to process and finalize.

Get In-Store Financing for Furniture

The most common method of financing furniture is applying for credit at the store where you purchase your furniture. In-store financing is quick and easy and is often the easiest option to get approved for.

Special financing deals may be available with in-store credit, like a 0% introductory rate. This allows you to pay over time with no interest as long as the bill is paid on time each month and the balance is paid before the introductory period ends.

Ask for all the details about the financing before you sign on the dotted line, and read them thoroughly. If you miss payments or fail to pay off your balance during the introductory period, interest rates on store credit can shoot up to 30% or more. You can also be charged back interest starting from the time of purchase, which can show up suddenly as a large lump sum on the account.

Home Equity Line of Credit

A home equity line of credit, or HELOC, is another option for financing a furniture purchase. This is a revolving line of credit you can borrow against which is backed by your home. With a HELOC, you have a borrowing limit determined by the value of your home; you pay interest only on the amount you choose to use.

HELOCs give you the flexibility to borrow as you go. If you’re doing a renovation project and want to include furnishings, a HELOC could be a good fit since it will allow you to pay for both over time and decide how much you need as your project and decorating progress.

Interest rates with HELOCs often have low interest rates, but these loans usually have a variable interest rate. In other words, if the market changes, your interest rate could go up.

Since a HELOC is based on the value of your home, it’s important to understand that defaulting could put your home or its value at risk. It can also take two to six weeks to secure and finalize a HELOC.

Before selecting a HELOC, compare available loan terms, costs, and fees. You’ll want to look at how you can access the money, which may be via a debit card, by writing a check, or transferring money to another account. As with a standard home equity loan, a HELOC requires you to bring cash at signing for closing costs and associated fees.

Secured Loans

Secured loans are personal loans that require collateral – that is, valuable property the borrower owns and puts up as security in exchange for the loan. If a borrower doesn’t pay back a secured loan, the collateral may become the property of the lender.

Since collateral lowers the chance a lender will lose its money, interest rates on secured loans tend to be lower than on unsecured loans. Secured loans may also offer more time to pay and approval for higher amounts than unsecured loans.

Since secured loans are relatively easy to get and are friendly to a wide range of credit scores, they can be an attractive option for financing furniture. Just keep in mind that secured loans typically have a variable interest rate, so your payments could go up at any time.

Borrow from Friends or Family

Should you finance furniture at all? If you’re fortunate enough to have a generous friend or family member, you could ask them to lend you the funds needed for your furniture purchase. While it can be awkward, this can be an excellent solution depending on the terms you agree to. There’s no application, no approval process, and you can negotiate flexible terms.

Before borrowing, work with your lending friend or family member to discuss and agree to all the details. Consider the repayment expectations and schedule, whether you’ll pay any interest and how much, and what you both think should happen if you miss a payment. It’s a great idea to put all this in writing and have both parties sign it. Not only does this promote accountability, but it protects both of you if there’s ever a dispute.

And that’s the biggest risk. When borrowing from a friend or family member, any dispute can jeopardize or even ruin the relationship. A failure to pay back the money could even put your friend’s finances at risk. Consider whether borrowing from a friend or family is worth it before you take this option.

Personal Savings

Perhaps the best option for financing furniture is not to finance them at all but to save up the money over time, then purchase your items. While today we do this less often than previous generations, there are plenty of advantages, including not taking on debt, paying interest, or being tempted to buy things we can’t afford. You might even have an emergency fund that could help with your furniture costs.

If you’re going to save up money, high-interest savings accounts or money market accounts can be good places to “park” your money as you save. These will help you earn interest while you save at a higher APR (annual percentage yield) than a standard savings or checking account.

Furniture Financing Options to Avoid

If you can, avoid any financing options with high interest or payments that will be hard for you to make on your income.

Payday loans may fit into both these categories. They are available to those with low credit but at a high cost for a typically small loan amount. You could end up paying much more than the cost of your furniture in the end. It’s also possible to have problems with the next month’s bills and be caught in a cycle of payday loans.

If you’re wondering how to finance furniture for a new home, saving up is usually your best option since you’ve just taken on substantial debt. That will lower your credit score for a time, affecting the interest rates available to you. There are also a lot of expenses that come with owning a new home, especially in the beginning, including new mortgage payments. If you can, wait at least a few months and see how much is left in your monthly budget before committing to further payments. Buying second-hand furniture is a good solution for many new homeowners.

At the end of the day, there are lots of options for financing your furniture. Only you can decide which is best for you. Whatever you choose, be sure to understand your options, research offers thoroughly, and buy only what you can afford.

FAQs: Furniture Financing

What credit score do you need to finance furniture?

There are options to finance furniture with almost any credit score, but the options are more limited with poor or challenging credit. The worse your credit score is, the higher the interest rate you’re likely to pay.

Which is the best financing method to purchase furniture?

There is no one right answer to this question because buyers’ credit scores, preferences, needs, and circumstances are all different. Check out the article above for more information to decide what option might work best for you.

Does financing furniture build credit?

If you’re asking yourself “Does financing furniture help your credit?” the answer is maybe. As with any loan, financing furniture can help your credit if you consistently make all payments on time and ultimately complete payment for your loan.

Does financing furniture hurt your credit?

If the financing you choose requires a credit check, that will temporarily lower your credit score. But as long as you consistently make your regular payments until the debt is paid off, financing furniture could help your credit.

Is it hard to get a loan for furniture?

It’s not usually difficult to get a loan for furniture unless you have very challenging credit. In-store credit is often easy to qualify for. Just don’t let anyone talk you into buying more than you can afford or you’ll struggle with the monthly payments. This could further lower your credit score.

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