In my twenties, just out of school, my wife and I bought plenty of low-cost, assemble-yourself furniture. We didn’t want to spend a ton at the time, but much of it didn’t last nearly as long as quality furniture.
Once we moved into our main family home, we were ready to invest in some solid pieces of furniture. I spent a lot of time researching the various ways to finance and buy furniture so that we could make the best decision for our family. So, which is the best financial method to purchase furniture?
Which Is the Best Financial Method to Purchase Furniture?
There is no one-size-fits-all model. That is why there are several options for financing furniture. It’s important that you have at least a general understanding of each option so that you can make an informed decision on which is best for you.
| Furniture Financing Option | Overview | Pros | Cons |
| Layaway | Make payments over time, items held by the retailer until paid off | Pay over time | Risk of losing payments if not completed |
| Personal savings | Use cash on hand to pay for furniture | Avoid paying interest | Need sufficient savings |
| Cash | Pay the full amount upfront | May get discounts for cash | Need the full amount available |
| Rent-to-Own | Make payments over months/years until the total is paid off | Bring the furniture home immediately | Pay two to three times the retail cost |
| Credit cards | Intro 0% APR offers allow paying over 12-18 months interest-free | Rewards | High interest after the intro period ends |
| Payday loans | Fast cash with very high fees/interest, credit union membership | No credit check | Risk of a debt cycle |
| Personal loans | Borrow money from a bank or online lender | Predictable payments | Needs good credit |
| In-store financing | Deferred interest promotions from furniture stores | 0% interest intro period | Back interest if not paid in full |
| Home equity loan | Borrow against home equity at low-interest rate | Low-interest rates | Home is collateral |
DISCLAIMER: This article is not to be construed as financial advice. The publisher of Home Stratosphere is not a financial adviser or a personal finance writer. Instead, this article simply sets out information based on personal research about using borrowed money to pay for furniture. Please always do your due diligence whenever borrowing money for any purchase.
1. Layaway
In recent decades, layaway has become among the most popular ways to finance furniture, especially during the holiday season. Most furniture stores offer a layaway program that allows the consumer to “reserve” their new furniture while they make regular payments.
With layaway, you make payments over time, yet your purchases stay in the store until you finish paying for them. While you won’t have to pay interest rates, most programs follow the same basic path.
- You can choose the items you would like to purchase.
- You need to make an initial deposit. Some furniture stores allow the consumer to choose the amount, while others have specific requirements.
- Over time, you can make small payments, usually in weekly, bi-weekly, or monthly amounts.
- Once the total purchase price (plus additional layaway fees) is paid off, you can take the furniture home.
2. Personal Savings
Saving your money and paying cash upfront are among the cheapest financing options. Once you decide on the new furniture item you want to buy, make a concrete plan on how to save enough money each week or month.
The main benefit of paying cash from savings is that you’re free from obligations like paying fees. However, this could take several months or even years, especially if you only set aside small amounts.
3. Cash
Before you look at various types of furniture loan options, paying cash should be among your first options to finance furniture.
- Pay no interest: After making a furniture purchase, there are no additional fees or interest rates, which means that paying cash is undoubtedly the most affordable option.
- Avoid debt: There is no possibility of acquiring debt when paying in cash.
- No risk of furniture repossession: When you own the furniture outright, there is no looming debt hanging over your head.
4. Rent-to-Own
Rent-to-own is a popular option for financing furniture when buyers can’t afford the full upfront cost. This financing method targets buyers who can’t qualify for financing yet desperately need furniture. While the low payments are appealing, the exorbitant total cost and risky terms make it easy to lose money.
Monthly payments are typically low, often without a credit check. However, the total is 200% to 300% of the furniture’s actual price. For example, a $1,000 couch may require $65 monthly payments over three years, totaling $2,340.
- The retailer allows the buyer to take home the furniture without paying in full.
- The buyer makes regular monthly payments over a set term, usually several years.
- The retailer can repossess the furniture if payments are interrupted.
- The buyer can also return the furniture at any time without penalty by canceling the agreement.
- Even if returned, the buyer may still be liable for repairs due to furniture wear and tear.
5. Credit Cards
Personal credit cards can be a convenient way to finance a furniture purchase. There’s no extra paperwork, and it doesn’t add new bills if you pay a credit card bill regularly. This can work well when you have a high credit limit and the income to pay off the balance within a few months.
- While you’ll need a credit check, there’s no upfront cost. The company pays the full amount to the retailer, and you own the furniture right away. You’ll owe the credit card company that amount plus interest if you don’t pay in full immediately.
- You wouldn’t need to pay any interest during the introductory period. However, you must make interest payments once the promotional period ends.
- In extreme cases, unpaid card debt gets sold to collection agencies, who may aggressively pursue payment. You could wind up with poor credit if you fail to pay off your credit card.
6. Payday Loans
Using payday loans is one of my reliable furniture financing options. Payday loans allow fast access to cash without credit checks, making them appealing for financing furniture when you have lower credit scores. Their ultra-high interest rates make them an extremely expensive option.
Payday lenders don’t need a credit history since pay stubs and credit union membership are typically enough. Fees and interest rapidly accumulate if you can’t repay on time, creating a vicious debt cycle. Payday loans should only be a last resort for urgent needs when no other options exist, not for buying furniture at one’s discretion.
To qualify, you just need regular income, often $1000 per month. You get the money quickly from federal credit unions, although you must repay it in a few weeks with very high interest charges. A $500 payday loan may cost $87.50 to borrow for a month – an annual interest rate of 400%.
7. Personal Loans
A personal loan is one of the preferred methods whenever I need quick access to cash with flexible terms. While it still depends on your bank, a personal loan generally requires monthly payments with a fixed interest rate. A credit union can also offer personal loans.
Since there’s no collateral involved in securing a personal loan, lenders will scrutinize your credit score and financial score. Thus, the better your credit, the better terms you’ll get for personal loans. Consequently, you may struggle to qualify or pay higher fees if you have poor credit scores.
8. In-Store Financing
Many furniture retailers offer in-store financing, often advertised as “0% interest” for the first year. This in-store financing appeals when buying furniture without upfront cash or an excellent credit score. However, missing just one payment can cause the interest rate to spike to 20% or more.
I recommend this if you can pay off the balance before the 0% APR promotional period ends. While 0% financing is tempting, the risks of retroactive interest make it like gambling that you won’t miss a payment. Even one late payment triggers financial devastation from back interest.
9. Home Improvement Loans
Getting home equity loans is also one of the best furniture financing methods. It allows you to borrow against your home’s value to help you buy new furniture. You use your home or savings accounts as collateral and make fixed monthly payments over 10 to 15 years.
- The benefits include a low fixed interest rate and a predictable payment system to pay off the principal faster than high-interest credit card debt.
- Home equity loans discipline you to methodically pay off a fixed-rate furniture loan over time rather than accruing credit card interest forever.
- Tapping home equity provides lower-rate financing for furniture versus high-interest credit card debt.
- Be cautious about using your home as collateral for furniture loans in case of default.
Next Steps on Financing Furniture
Decide your course of action as to how you are going to purchase the furniture that you want without digging yourself into a hole of debt and additional payments. You will also have to take a look at your current financial situation.
- How much cash do you currently have available?
- Can you afford additional debt?
- What’s your credit score? Can you get a decent interest rate?
- Do you have low-interest borrowing options such as a home equity loan or an unsecured line of credit?
- Are you in dire need of the furniture now, yet lack the funds?
- Are you willing to change your future finances with one of the riskier options, such as using a credit card or payday loan?
Once you consider these aspects, you will have the furniture you have had your eye on. Most importantly, your financial future will be far more secure.
Frequently Asked Questions
How Does Furniture Financing Work?
Furniture financing works by borrowing money to pay for furniture purchases over time through credit cards, loans, or payment plans rather than paying the full amount upfront in cash. The benefit is spreading out payments, although the risk pays more overall with interest fees.
Is It a Good Idea to Buy Furniture on Credit?
Buying furniture on credit can make sense for large purchases if you get a low interest rate, make payments on time, and pay off the balance within the promotional period. Avoid furniture financing with high-interest credit cards or predatory loans.
What Credit Score Do You Need for Furniture Financing?
A credit score of 670 or higher can help you qualify for the best financing rates from credit cards and lenders for your furniture purchase. Expect limited options and higher interest rates if your credit score is below 620.
How Can I Finance Furniture With Bad Credit?
When you have a poor credit history, consider saving up to buy furniture in cash or explore alternatives like buy-here-pay-here furniture stores, rent-to-own plans, or borrowing from family and friends to avoid high-interest financing. Using a secured credit card and diligently making payments can also help build your credit over time.
Conclusion
The best furniture financing options depend on your current financial capacity and available resources. You can save up and pay cash. Other options include low-interest financing options like introductory credit card offers or fixed-rate home equity loans, rather than high-cost alternatives to save money and avoid long-term debt.
