One of the great benefits of in-store financing is that most home furnishings retailers offer deferred interest for anywhere from one month to two years.
In-store Financing Success Story
Abby Sutton of Greensboro, N.C., spent weeks looking for the right leather sofa for her family room.
“When I finally found one that I really liked, there was an upholstered chair next to it that I decided to get too, plus some nice throw pillows,” she says.
When they were ready to check out, Abby and her husband decided to finance their purchases through the store’s financing program.
“I guess we could have paid for it all at one time, but the store had a ‘no interest for six months’ deal. It was easier for us to spread the cost over those six months, and it wasn’t costing us anything as long as we paid it off in time. We felt better about doing that than taking a few thousand dollars out of our bank account at one time,” Sutton says.
“Plus, any time we can open up a line of credit like that and pay it off, it’s good for our credit score—and that will be really important when we’re ready to buy a new home in a few years!”
Buying Furniture on Credit
From personal credit cards to in-store financing, buying home furnishings can be easy and affordable.
- by Trisha Kemerly
Whether you’re considering buying a single chair or a roomful of furniture, home furnishings purchases can add up. The last thing you want is to invest a few hours (or days or weeks) putting together your dream room without the resources to make the purchase when you’re ready.
Don’t worry—with the various credit options available in retail stores today, you can shop for home furnishings with confidence. The type of credit you choose may depend on a combination of how much you want to borrow, which type of credit offers the best interest rate, and your individual financial situation or preference. Regardless, from personal credit cards to in-store financing, buying home furnishings can be easy and affordable.
Personal credit cards can be a convenient way to pay for your home furnishings purchases. There’s no additional paperwork to fill out, and no new bills coming in the mail. Most home furnishings retailers accept Visa, Mastercard, and Discover cards, and many are now accepting American Express as well.
Be sure to check and make sure a large home furnishings purchase will not exceed your preset card limits. Also, be aware of the interest rate your credit company charges. If you are typically good about paying off your credit card each month, the interest rate probably doesn’t affect you very much. But if you’re planning on paying off a $5,000 purchase over the course of six months to a year, the interest can add hundreds of dollars to your initial purchase. Check your interest rate before you shop and estimate how long it will take you to pay off the balance. Once you look at the actual costs, you can make a more informed decision.
Personal Loans and Lines of Credit
Personal loans and lines of credit generally have higher credit limits than credit cards and can be a useful way to get cash quickly.
A personal loan from a bank or credit institution makes sense when you know exactly how much money you need. In essence, you borrow a lump sum at a fixed interest rate for a specified length of time, and then the fixed monthly payments include interest charges and any fees. Your payments reduce the amount of the loan until it is paid in full.
A line of credit is a good option when you’re not sure how much you need, or when you’ll need it. You can borrow the money up to your credit limit whenever you need to, usually by writing a check or transferring money into your checking account. This allows you to access your money over a period of time without having to reapply each time you need funds; and you make payments and pay interest only on the amount you use.
Home Equity Credit
Another option for large furniture expenditures is a home equity line of credit. This option often has the advantage of lower interest rates than many other credit options. The drawback is that to qualify, you must be a homeowner and have some equity in your home. To explore this option, you should contact your local bank to review your options.
Most furniture stores have their own credit solutions, and in many cases, store credit is backed by or affiliated with large “private-label” financial institutions (such as Citi Retail Services, Bank of America or Wells Fargo).
To utilize an in-store credit option, you will need to apply for credit at the store (some retailers also let you apply on their website). The financial institution will issue you a line of credit to use in the store, in an amount based on your credit standing. While the specific requirements for eligibility vary from one store to another, there are almost always proof-of-income and residency requirements. Interest rates for these types of financing options also vary.
If your credit is less than perfect, you may not be approved for credit with the store’s primary financial lender. However, some retailers have secondary lenders that may be more lenient. If you’re not approved by its primary lender, the store will often notify you and then resubmit your application with its secondary company. Bear in mind a secondary lender may offer a higher interest rate as well.
A third type of in-store credit is one that is offered by the store itself, where the terms and conditions are set by the individual store.
One of the great benefits of in-store financing is that most home furnishings retailers offer deferred interest for anywhere from one month to two years. The interest accrues from the date of purchase, but if you pay off the amount before that deferment period ends, you are in essence paying the total amount “same as cash.” If you do not, the full interest amount is added to the balance.
Brent Shealy, owner of Economy Furniture in Leesville, S.C., says his store offers both a private-label credit option as well as an in-house financing program.
“Our Brand Source card program allows us to offer extended terms and 12-month interest-free financing, and that works great for a lot of our customers,” says Shealy. “Other customers prefer the convenience of our in-house financing, which often times allows us to be more flexible to their needs because the credit is being offered by the store, not a third party.”
Shealy admits that not too many retailers are offering the true in-house financing anymore, but he likes the accessibility to credit that it gives customers.
“There’s a more personal relationship between store and customer that way, and it’s a one-stop deal—there’s no calling another source, going to another location to get the loan, and so on. It lets the store take care of the customers completely.”
Paying monthly installment payments or “rent-to-own” arrangements are another form of financing specifically for rent-to-own businesses. However, interest rates are usually significantly higher for this type of financing, so make sure that this is your best option before committing to the terms.
Know Your Options
Getting the best terms for your home furnishings purchase means knowing your options. Customers with good, established credit, generally have more financing options than shoppers with less desirable or no credit history. Yet, just as there is a furniture style that fits every customer, there’s a credit solution that fits most every budget. And by utilizing one of the many financing opportunities available, you can build a solid credit record and furnish your home at the same time.