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Furniture Financing 101

furniture financing sofas and more knoxvilleAt Sofas & More we have furniture financing options for everyone. Whether you have established credit or need to build or rebuild your credit, Sofas & More will find the right financing plan to meet your needs. We’ll do everything you can to make sure you get the furniture you want, in a way that works for your budget. Check out our Furniture Financing Page to see all of the options available to you.

That said, we still feel as though we owe it to customers to run through some of the most common and preferable furniture financing options available. We want you to get a piece of furniture from us and enjoy it for years, but most of all, we want you (regardless of where you buy) to make a smart furniture financing decision, which allows you to enjoy your new furniture stress-free, with no concern over paying the bills.

Furniture Financing is a big deal for most buyers…

In recent decades, layaway has become a popular option among consumers, especially during the holiday season. Many furniture stores offer a layaway program that allows the consumer to “reserve” their furniture for later pick up while they make regular payments. To some, this can be extremely appealing, but there are certain risks that can greatly out weigh the possible benefits. With layaway you make payments over time, but your purchases stay in the store until you finish paying for them. Though every store differs on their rules, most programs follow the same basic path. One of the most notable benefits of any layaway program is that there is no interest. While other payment methods such a buying with credit or borrowing from a lender may require a sizable sum added on to the total amount in the form of interest. Also, unlike purchasing furniture on credit, stores do not conduct credit checks in order to approve consumers for the layaway program. As mentioned before, the layaway program often sounds like the most suitable option, but can also go wrong. Life has a way of throwing curve balls our way occasionally. This can come in the form of added expenses that force you to either miss payments or to completely back out of the layaway program all together. It’s possible that the payments that you’ve already made on the purchase could be lost. In that case, you may as well have emptied out your checking account and handed the store your hard earned cash. Some stores may reimburse you by offering store credit for what you’ve paid. In this instance, the money you paid is not necessarily lost, but can only be used at that particular retailer, which isn’t ideal either.

Good Old Fashioned Cash
Before you turn to credit cards or look at various loan options, the first choice for furniture financing should be old fashioned cash, dough, moola. Whatever you want to call it, cold hard cash will always be the most prescribed method for making a purchase. Why?

  • Pay no interest
  • Avoid debt
  • No risk of repossession or lost funds

If you happen to fall into the category of people that has ample amounts of money stashed away, then this might be the perfect time to dip into your savings.

Rent or Lease to Own
Many retailers don’t offer the option of rent to own, as it’s typically reserved for niche retailers that only do rent to own. Rent to own is a furniture financing option that should be a fallback plan for those unable to purchase furniture outright or get conventional lending. Though they vary in exact terms, a rent to own agreement is a signed plan where the retailer allows you to take the furniture from the merchant location directly to your home without having to pay the full upfront cost. Within the agreement, the consumer acknowledges that they will be required to make regular payments (either weekly or monthly). If regular payments are interrupted, the retailer obtains the right to repossess the furniture at any time during the term agreement. Additionally, the consumers can cancel the agreement, without penalty, at any time by returning the furniture. The monthly payments are typically low and often times there isn’t even a credit check involved. All rent to own agreements should provide the monthly amount that is required to pay, the total amount required to pay, and the total length of the agreement. Once the end of the agreement term is reached, the furniture will be yours to own and do with what you please. It’s important to remember that although this may sound like a sensible option for some, it equally benefits the retailer as well, often to your detriment. While the payments are generally low, allowing an incredibly affordable option for those that lack the funds to outright buy an expensive piece of furniture, the term lengths can go on for quite some time (several years in many cases). Eventually these small payments add up to a significant amount of money. On the surface, their terms seem reasonable, but if you were to add up the payment terms, you’d likely find that you will end up paying 200-300% or more of the actual worth of that furniture and 3 – 5X or more what you would have paid at a conventional retailer. Some furniture stores have started Lease to Own programs with conditions more favorable to the customer, but it’s still an option that should mostly be utilized if you simply don’t have any other way to fund a furniture purchase.

Furniture Financing with Credit Cards
Personal credit cards can be a convenient way to pay for your home furnishings purchases. There’s no additional paperwork to fill out, and since you already pay your bill, it won’t add any new bills. The downside to all of this is that you will be in debt to your financial institution, which can hinder your credit for later purchases. Your credit rating is like your financial footprint and when you default on your credit card; your livelihood will typically mirror your circumstances. Though it is unlikely that the bank will come and seize your assets, it’s essential to pay off any debt that you may have to avoid being deemed a credit risk. In extreme circumstances, the debt that you owe will be sold off to a third party collection agency. Once a collection agency gets involved, it’s almost guaranteed that they will use any tactic necessary to obtain the remaining funds, even if it means being aggressive to the point of harassment… which can be a hassle to deal with.

Retailer Furniture Financing
Now most major furniture merchants have their own type of financing programs for their customers; especially for those that don’t pay with cash. In order to make this happen, retailers pair up with a lender for an interest free plan where borrowers pay 0% interest for the first tier (or period of time, ie. 1 year, 3 years, etc.) if they make each monthly payment on the agreed upon time. If you play by the rules, you’ll receive your 0% interest and save a serious chunk of change. However, if you happen to miss the payment date or misinterpret the day that you’re supposed to make your payment, then you could end up with a hefty interest rate hike. There is nothing inherently wrong with using a retailer’s line of credit, and it can be extremely advantageous, as long as you are absolutely certain that you can pay off the required amount in the designated time.

Furniture Financing Loans
Finally, some other options for furniture financing might include home improvement or home equity loans for large purchases, where you borrow money using your home as collateral using the amount of equity in your home to determine the amount that you would be allowed to borrow. Large purchases on your credit card will only increase the minimum monthly payment, making it much more difficult to pay off the balance. When it comes to credit cards, the monthly payment is mostly interest and not much principal (the amount of money you originally borrowed), which is why it could take years to pay off a single balance. Plus, if you miss a payment, then the issuing financial institution may increase the interest rate even further, causing the monthly minimum to skyrocket. With a simple home improvement or home equity loan from your bank, more of your payment will go towards paying the principal, which will allow you to reduce your loan balance much sooner than if you made monthly payments on your credit card. Additionally, when you borrow money from a lender and make your installment payments on time, it will help you build further credit with future lenders and banks and improve your credit score vs. lowering your credit score by carrying a high balance on an open credit card.

That’s it for now, hopefully that helps. At Sofas & More, all of the above options are available for furniture financing and you’re always welcome to talk to our in-store staff about the options that might be best for you. Whether you have established credit or need to build or rebuild your credit, Sofas & More will find the right financing plan to meet your needs. We’ll do everything you can to make sure you get the furniture you want, in a way that works for your budget. Check out our Furniture Financing Page to see all of the options available to you.