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Scrolling through home decor inspiration on social media could motivate you to do an interior refresh, but sprucing up the place can cost a pretty penny. If you’re in need of new furniture, using in-store financing or other borrowing options could help you buy items now and pay them off over time. Here are seven furniture financing options to consider.
1. Personal Loans
| Pros | Cons |
|---|---|
| Interest and payments are usually fixed | Lenders may charge upfront origination fees |
| Lenders often let you prequalify without a hard credit inquiry | Having poor credit can make it hard to qualify |
| You could get funds within a few days | Interest rates may be high if your credit is bad |
Personal loans are installment loans that offer borrowers a lump sum in cash that can be used on almost any legal personal expense. These loans often have fixed interest rates and are unsecured, which means you don’t have to pledge collateral like your home to back it.
Interest rates on personal loans typically range from 4% to 36%; however, loan rates you might qualify for depend on factors like your income, credit and debt-to-income (DTI) ratio. Loan terms for personal loans generally range from one to seven years.
Many lenders let you prequalify for loans online within minutes, and it sometimes only involves a soft credit check that doesn’t affect your credit score, though you should check with the lender first before applying. In some cases, you could apply, get approved for a loan and get loan funds within just a few business days.
2. In-store Financing
| Pros | Cons |
|---|---|
| Quick in-store or online applications | Interest after the 0% APR period may be high |
| 0% annual percentage rate (APR) financing deals may be available | Retroactive interest may be charged if you don’t pay off purchases within the interest-free period |
| Not all stores offer in-store financing |
In-store financing can come with higher interest rates than personal loans or credit cards, but financing specials can make the option a good deal. For example, you might see a promotion that offers 0% APR for 12 months.
However, if you don’t pay off the balance before the end of the interest-free period, you could be charged the interest that accumulated since you initially borrowed. This interest can show up on your account in a lump sum, and it can be hard to pay off.
If you make it a priority to pay off your balance during the 0% APR special, in-store financing could be a interest-free way to borrow money for your next big furniture purchase.
3. Credit Cards
| Pros | Cons |
|---|---|
| Quick online applications and credit decisions | Some cards charge annual fees |
| Intro 0% APR specials may be available | Standard interest rates may be high |
| Purchases may earn rewards | Revolving debt could be hard to pay off |
Credit cards offer a credit limit that you can use to buy furniture and pay down over time. Some card providers even run their own 0% APR promotions that could last several months. Plus, making a large purchase could help you earn rewards points, miles or cash back that you could use to pay for travel and more.
While you’re expected to repay your balance in full every month, you’re only required to pay your minimum payments. However, paying the bare minimum will cause your balance to grow from the interest over time. Credit cards may also come with an annual fee to factor into the cost, and cards that earn high-value rewards could have membership fees of $99 or more.
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4. Home Equity Loans
| Pros | Cons |
|---|---|
| Interest rates are typically fixed | You need sufficient home equity to qualify |
| Rates may be lower because the loan is secured by your home | If you can’t pay off the debt, you risk losing your home |
| Long loan terms may be available | Lenders may charge closing fees |
A home equity loan is a secured installment loan that lets you borrow from equity you’ve built up in your home. How much you can borrow depends on factors like your credit, income and home value. Home equity loan terms generally range from five to 30 years, giving you the flexibility to choose a term that fits your needs.
The downside to home equity loans is that the lender could try to go after your home if you’re unable to make payments because it acts as collateral. Plus, you have less ownership stake in your home after borrowing from it, which can reduce the money you get in your pocket if you decide to sell. Lenders may also charge closing costs, like appraisal, application and credit report fees, to process the home equity loan.
5. Home Equity Line of Credit
| Pros | Cons |
|---|---|
| Flexible credit line to use and pay off | You risk losing your home if you can’t repay the debt |
| Low introductory rates may be available | Lenders may charge closing fees |
| Interest is typically variable and may increase during the life of your loan |
A home equity line of credit (HELOC) is a revolving credit line backed by your home—instead of a lump-sum payment. Unlike home equity loans, the interest on HELOCs is usually variable, so your rate could increase over time if market rates start to rise. However, HELOCs may come with low starting interest rates that could help you pocket early interest savings.
When shopping for HELOCs, compare costs and options for withdrawing funds. Some ways to withdraw could be by writing a check, using a debit card or transferring money to your bank account.
6. Borrow From Friends or Family
| Pros | Cons |
|---|---|
| No application or approval process | Asking someone to borrow money may be awkward |
| You can negotiate flexible repayment terms | Arguments over debt can cause relationship rifts |
If you have a family member or friend that’s flush with cash and able to offer you money to buy furniture, this could be an affordable solution. Just make sure that you and the friend or family member are in agreement about how the loan will be repaid and the interest rate. Otherwise, arguments over money could make this option more of a hassle than it’s worth.
7. Personal Savings
| Pros | Cons |
|---|---|
| No debt to repay | It takes time to save up |
| No interest or borrowing fees involved | Purchases may be delayed while saving |
Saving up money for furniture isn’t technically financing a purchase, but it’s still worth mentioning as an option for a shopping haul. If you can put off decorating for several months, the benefit of saving up is that you won’t have to worry about repaying debt or interest.
High-yield savings accounts are a good place to stash cash for buying furniture because they tend to offer a higher annual percentage yield (APY) on your money than a checking account or traditional savings account.
What Furniture Financing Options Should I Avoid?
Furniture financing options to avoid are any form of borrowing where interest rates are high and payments that are difficult to manage. Payday loans are known for having both of these characteristics and are a type of loan to steer clear of in almost all circ*mstances.
Touted as a quick way to get money even with bad credit, payday loans are typically small, expensive loans that may not offer enough cash to buy furniture. Saving up money, borrowing from a friend or working on your credit to qualify for a lower-cost loan are better ways to finance furniture than using a payday loan that could get you caught in a debt trap.
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