Financing furniture has a range of benefits. It’s a quick and convenient way to make sure your home is furnished. It also allows you to furnish your home without taking such a significant hit to your personal cash flow as an all-cash transaction would.
Despite this, there are some downsides to buying furniture on finance. From costly interest rates to deals that vary between retailers, it’s important to be aware of the ups and downs of buying furniture on finance before you commit to a deal.
From choosing the right payment period to using retailer finance as opposed to your credit card, read on to learn the most effective and affordable ways to buy furniture for your home on finance.
SAVE MONEY BY COMBINING CREDIT WITH A LARGE DOWN PAYMENT
If you’ve recently moved into a new property and need to furnish it, or you feel it’s time to replace your exiting furniture, the prospect of spending £10,000 or more to furnish several rooms can be daunting.
Buying furniture on finance is a great way to reduce the short-term costs of buying furniture, but it can often cost more over the long term, especially if you’re only able to access a high interest rate.
A great third option is to buy furniture on finance, but with a large down payment that reduces the total amount you’ll need to pay over time and makes the interest you’ll pay on the furniture more tolerable.
Try to provide as big a down payment as possible without affecting your cash flow too much. An excellent goal to aim for is a 50% down payment on furniture, which would be £5,000 on furniture that costs £10,000 in total.
Paying a reasonable down payment not only reduces the amount of interest you’ll need to pay on the furniture – it also lowers the monthly payment and, if you want to pay off the balance over a shorter period, can result in fewer payments in total.
FOR SMALL FURNITURE PURCHASES, CONSIDER USING YOUR CREDIT CARD
If you’re only spending a few hundred pounds on furniture, signing up for a credit arrangement with the retailer can be uneconomical and produce extra paperwork that, given the small balance, just isn’t worth it.
For small purchases, it’s often easier – and occasionally cheaper – to use your own credit card than to sign up for the retailer’s credit card or buy the furniture using a hire purchase agreement.
Using your own credit card also lets you earn reward points and improve your own credit history. Another benefit is fewer monthly bills to worry about and a far more manageable single monthly payment instead of several separate payments.
BUYING FROM ONE STORE? USE A RETAILER’S CREDIT CARD FOR AN INTEREST-FREE PERIOD
Are you buying several items from one retailer? When you need to purchase several items from the same retailer, such as a sofa and set of armchairs, it’s usually cheaper and easier to use the retailer’s credit card than to use your own. Retailer credit cards usually have a high interest rate, making them uneconomical if you can’t keep up with the monthly payments. However, interest-free offers can be a fantastic option if you can easily manage to keep up with the payment schedule. Before you consider buying furniture using a retailer credit card, double check that you can keep up with the payments. If you fall behind, you could face an interest rate of 20 to 30 per cent or more. If you can manage the payments easily without affecting your personal cash flow, it’s probably a good idea to choose the store card. Before you buy, ask the retailer if any special offers or discounts are available for card holders.
IF YOU HAVE BAD CREDIT, BE PREPARED TO FACE A HIGHER INTEREST RATE
Do you have a bad credit history? If you have bad credit – or if you have no credit at all – you’ll need to use the retailer’s credit card to purchase furniture, meaning you’ll face a higher interest rate than you could get from a standard credit card. If you can keep up with the monthly payments for your furniture, this isn’t a serious problem. However, if you fall behind and miss a payment, the cost can quickly grow and become quite significant. In the event that you can’t get credit from a retailer because of a bad or insufficient credit history, you can also use hire purchase to get the furniture now while paying it off over an extended period. Hire purchase is typically much more expensive than buying furniture outright or using a credit card. However, if you need furniture right away and don’t have the cash to buy it outright, it could be your only option.
MAKE SURE YOU CAN KEEP UP WITH PAYMENTS BEFORE YOU BUY ANYTHING
Entering into a credit agreement with a retailer when you can’t afford the monthly payment can be an expensive mistake. Even with a normal credit card interest rate, you could face hundreds of pounds in additional costs by missing several payments. Before you buy anything on credit – whether it’s an inexpensive item or something costly like furniture – double-check that you can keep up with the payments while still paying for your normal living costs. It pays to be conservative about your financial abilities, especially when signing a long-term payment contract. Create a budget before you begin shopping and make sure you stick to it while choosing furniture to avoid any personal cash flow issues.
I just dropped $800 on furniture because I'm trying to be more adult and being adult means credit card debt— Jake Regal (@jakeregal) 11 April 2014
ARE YOU SHOPPING FOR FURNITURE ON FINANCE?
With the right planning and preparation, buying furniture on finance gives you the furniture your living room, dining room or bedroom needs without the long period of saving that paying can usually requires.
If you’re shopping for furniture on finance, make sure you’re completely aware of your financial obligations, from rent or mortgage payments to weekly living costs, before you rush to purchase your favourite sofa or recliner.
At AHF we offer a popular interest free finance option. We can work out the term and monthly payments to suit your budget, with low affordable monthly payments. Find out more by clicking the link below.