Working out how to pay for big ticket items can often be tricky, and paying for furniture often falls into this category. Whether you are setting up your first home or just giving your home a little refresh, paying for a new sofa or bed is money you wouldn’t normally be spending.
So if you don’t have enough monthly disposable income or savings stashed away to cover the cost of furnishing a home, is furniture finance the way to go?
What is furniture finance?
Furniture finance is typically interest-free credit that you repay over an agreed term. How long the interest-free period is and how much the repayments are will depend on what the retailer is offering, how much you are spending, whether or not you pay a deposit and how long you will make your repayments for.
Retailers typically offer credit through a financial services provider. As this finance is a form of credit, a credit check will take place as part of the application process, meaning there is no guarantee that you will be accepted. Obviously, the better your credit score, the more likely it is you will be successful in your application.
Is it a good idea?
Taking on further debt should always give pause for thought. While the temptation may be to sign up to an interest-free product, doing so does have its pitfalls. Here are a few things to think about:
- You may be tempted to overspend. If you are not paying the full amount for a sofa or bed or table up front, it may be tempting to go above your budget.
- You will be taking on more debt. Having multiple loans and credit accounts can affect your credit score.
- You are making a monthly financial commitment, which in turn will impact your disposable income.
- If you miss any repayments, you could negatively impact your credit score.
Furniture finance or 0% credit card?
If you think that interest-free store credit is not for you, you could consider using a 0% purchases credit card to fund your purchase. These credit cards have an interest-free introductory period on anything you buy with the card, meaning you could buy your furniture item and pay it off over time.
The benefit of a 0% purchases credit card versus furniture finance is that you will typically have more flexibility in your repayments. Most of the time with a furniture finance scheme you will have a set repayment schedule over a period of time. However, with a credit card you can decide when and how much to repay.
The key with a 0% purchases credit card is to try to pay off your balance in full before the end of the interest-free introductory period, otherwise any remaining balance you have will be charged interest at the card’s standard rate.
It is also worth noting that 0% purchase credit cards do carry some of the same risks as furniture finance: it can be easy to overspend, multiple credit accounts can work against you, and missed payments can affect your credit score.
Verdict
It could be said that if you are considering buying furniture on credit, then you can’t afford it. If you are struggling to pay for a brand new item, then maybe look for something secondhand that could be more affordable or check whether friends or family have anything they could lend you.
If there is no other option but to buy new, then consider how much you are comfortable paying a month, how long for, and whether you can afford a deposit. Then also think about what debt you already have and whether you can afford to take on more repayments.
You may already have a credit card that offers interest-free purchases; if so, maybe utilise that facility. If, on the other hand, you want to go down the interest-free furniture-financing route, make sure you keep within your budget and think about the monthly repayments and how making these will impact your financial future in the longer term.
