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Purchasing a new house or planning a renovation always feels like a new chapter in your life. While you’re already looking forward to the imminent changes in your home, pleasant chores and rose-colored anticipation can be a little overshadowed by looking at the price tags.
New furniture is often expensive, plus you may have other expenses associated with renovations or becoming a homeowner. Luckily, there are furniture financing options that can help you purchase the needed items without much stress and repay the money over some time. But how to choose the right option? What factors do you need to consider? Below are a few tips that will help you out!
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Assess Your Financial Situation
First, you need to understand where you start from. List your earnings and expenses, including current debts you pay each month. This will help you calculate how much money you have on hand after you make all your mandatory payments. By doing so, you will be able to understand how much money you can spend on new furniture.
If you find out that you can’t cover a furniture cost without additional assistance, budgeting will also help you decide on the right loan amount. By knowing how much you can pay without sacrificing other expense categories or your habitual way of life, you will be able to ensure that loan payments are within your means.
Understand The Available Financing Options
Furniture financing now comes in many forms. Choosing the right one will help you gain a positive borrowing experience and finance your purchase without ripping you off. Here are the most popular and easy furniture financing options.
In-Store Financing
In-store financing is a great option for people who already have strong credit. It provides you with access to a 0% APR credit line that you can use to buy furniture. If you manage to pay off your balance before a promotional period ends, you’ll only pay the bare cost of your furniture. This way, you can save money on interest.
However, after the promotional period ends, an interest rate will be applied to all remaining balances. The interest rate can be as high as 30%, so you’d better assess your chances of repaying the loan during the grace period so as not to overpay.
Credit Cards
If you already have a credit card, you can use it to purchase new furniture without applying for new loans. However, read your credit card terms carefully to understand the conditions. Learn more about the grace period, if any, and the interest applied after it ends. Also, pay attention to your credit card limit and make sure it’s high enough to finance the items you need.
Personal Loans
Getting a personal loan is one more option for people with good to excellent credit. You can apply for one in a bank or credit union and spend the money on any personal needs, including furniture financing. Personal loans typically have reasonable interest rates that range from 4.99% to 35.99%. The repayment period is flexible and is commonly up to 60 months. You can choose the term that fits your budget.
But keep in mind that longer repayment terms not only result in lower furniture monthly payments but also come with higher total loan costs. Additionally, it will take you some time to apply and get approved for a personal loan. Also, you need to be ready to provide a set of documents required by a lender and go through a hard credit check. If you need money fast or have credit issues, personal loans are not the best option for you.
Bad Credit Loans
Furniture financing with bad credit is possible too. Bad credit loans are similar to traditional financing options but have higher interest rates. They also vary by repayment terms and schedules, so you can choose the one that works better for you. It can be, for example, an installment loan, a payday loan, or a car title loan.
These options are also known for being accessible. When you apply for bad credit furniture financing, lenders don’t check your credit report through major credit bureaus. This means that any credit is accepted, provided that your income is sufficient to repay the funds on schedule. Also, furniture financing without credit checks helps lenders make decisions fast, so you can get the funds within one business day. That is why some people with good credit also use these options if they need money urgently.
Secured Loans
Secured loans are another option for people with bad or poor credit who need additional furniture financing. These loans are cheaper compared to regular bad credit options. However, they require collateral to get the funds. As a pledge you provide serves as a repayment guarantee, a lender can offer you better loan terms. At the same time, you risk losing your asset if you fail to repay the loan.
Compare and Contrast Financing Options
After you find out what options you can access, it’s time to decide which one is better for you. To do this, you need to compare and contrast several offers from different lenders or service providers. Fortunately, most lenders now allow borrowers to pre-qualify for their loans without affecting a credit score.
First, contact a seller and ask about in-store financing options it offers, if any. Then, pre-apply for loans from conventional or alternative loan providers, depending on your credit score and urgency. Then, compare the offers you get in terms of interest rates, repayment terms, additional fees, and other important conditions. Pay attention to the total loan cost and make sure you can afford monthly payments to avoid penalties.
Read Fine Print
Those written in fine print are usually the most important. Fine print can specify conditions that a lender doesn’t want to disclose but is forced to due to legal requirements. For example, the fine print may indicate additional commissions, fees, or certain conditions under which you can receive a specified price or rate.
When it comes to loans, everything is important. Thus, don’t neglect reading agreements carefully. You need to be sure you fully understand all the financing terms before signing any documents. This will help you avoid negative consequences and will make your borrowing experience pleasant.
Make an Informed and Well-Thought-Out Decision
Even when you understand all the terms and conditions of furniture financing, you must remember that sometimes loans, even those options on the most favorable terms, may not be affordable for you. For example, you may have other debts with higher priority, fluctuating income, or a temporarily difficult financial situation. In such cases, you’d better refrain from getting a loan and postpone the purchase until better times.
You may also consider alternative furniture financing methods. For example, you can borrow money from friends or family or save a small amount each month from your paycheck. The main thing you need to remember is that the debt must always be repaid on time. This will help you ensure that the loan doesn’t make your financial situation worse. Before you turn to furniture financing, make sure that the potential financial burden fits your budget.
Bottom Line
Furniture financing can be a great way to purchase the items you want at the moment you need them. This option can work for you if you don’t have much savings or have already spent decently on home improvements or purchasing a new house. As there are multiple financing options available, you can choose the one that seems suitable for you. Just assess your financial situation, learn more about various types of loans, compare several offers, and choose the right one based on the loan terms. Reading the fine print and staying realistic about your income will help you pick the right financing option.
