Have you ever wanted to buy a new sofa, bed, or dining table but felt discouraged by the price? Have you ever wondered if there is a way to get the furniture of your dreams without breaking the bank? If so, you may have considered furniture financing. This option allows you to pay for your furniture monthly instead of upfront. But is furniture financing a good deal, or is it a trap that will cost you more in the long run? In this article, we will explore the pros and cons of furniture financing and help you decide whether it is right for you.
Furniture financing is acquiring furniture by paying it in monthly installments rather than making a lump-sum payment at the time of purchase. This payment method has become increasingly popular in recent years, as the global furniture market size was estimated at 509.8 billion U.S. dollars in 2020 and was projected to reach 903.14 billion U.S. dollars by 2029, growing at a compound annual growth rate (CAGR) of 5.57%.
To help you evaluate whether furniture financing is a good option for you, based on pros and cons. You can see them in the following sections:
Pros of Furniture Financing
1. Convenience
One of the main advantages of furniture financing is that it offers the convenience of taking home the furniture you want without saving up or waiting for sales. Monthly payments make the acquisition process more manageable, as you can spread the cost over a period that suits your budget. This can be especially helpful for urgent or large purchases, such as replacing a broken bed or sofa or furnishing a new home or office.
2. Affordability
Another benefit of furniture financing is that it can make expensive furniture more affordable for buyers on a budget. Furniture financing can help you avoid depleting your savings or emergency funds, which can be useful for unexpected expenses or emergencies. Furniture financing can also help you take advantage of discounts or offers that may not be available otherwise, such as zero-interest or zero-down payment plans. By 2025, it was projected that nearly 22 billion U.S. dollars would be spend on stationary sofas and sofa sleepers in the United States.
3. Variety
Furniture financing can also give you more choices and flexibility in selecting furniture that suits your needs, preferences, and style. Furniture financing can enable you to shop from a wider range of stores and brands, some offering exclusive financing deals or discounts.
4. Rewards
Some financing options offer rewards or cash back for using their services, such as store credits or gift cards, that add value to your purchases. For example, some store credit cards may give you a percentage of your purchases back as store credit or gift cards. This can help you save money or get more value from your purchases.
5. Warranty
Some financing options include a warranty or protection plan for the furniture they finance, which gives you peace of mind and coverage for repairs or replacements in case of damage or defects. Buyers should read the terms and conditions of the warranty carefully and compare it with other options. For example, some warranties may cover accidental damage, stains, or wear and tear, while others may not. Some warranties may also have a limited duration or require a deductible.
Choosing the right furniture financing option can be tricky. That’s why we’ve created this guide to help you compare and select the best one for your needs.
Cons of Furniture Financing
1.Interest
One of the main drawbacks of furniture financing is that it can come with high interest rates, especially if you have poor credit or missed payments. Interest can significantly increase furniture costs over time, making it harder to pay off the debt. For example, suppose you buy a sofa worth 1,000 U.S. dollars with a 12-month financing plan at an annual interest rate of 18%. In that case, you will pay 1,090 U.S. dollars for the sofa, or 90 U.S. dollars more than the original price. If you miss a payment, you may incur additional fees or penalties, increasing the cost.
2. Fees
Another disadvantage of furniture financing is that it can involve various fees, such as origination fees, late fees, prepayment penalties, or annual fees. These fees can add up and reduce the savings or benefits of financing. For example, suppose you buy a bed worth 500 U.S. dollars with a 6-month financing plan at a zero interest rate but with a 10% origination fee and a 5% prepayment penalty. In that case, you will pay 550 U.S. dollars for the bed, or 50 U.S. dollars more than the original price. If you pay off the debt early, you may also have to pay 25 U.S. dollars as a prepayment penalty, which can further increase the cost.
Calculate your monthly payments and how much your loan will really cost you using our APR calculator .
3. Credit Impact
Furniture financing can also affect your credit score and history, depending on how you manage your payments and debt. Applying for multiple financing options can lower your credit score due to hard inquiries, which are requests by lenders to check your credit report. Missing or late payments can also damage your credit score and history, as they indicate that you are not a reliable borrower. On the other hand, making timely and consistent payments can improve your credit score and history, as they show that you are a responsible borrower. Your credit score and history are important factors that determine your eligibility and terms for other loans or credit cards in the future.
If your credit score is bad and your are looking for a furniture financing option then this article will help you out – Bad Credit Furniture Financing Options- Secure And Affordable
4. Debt
Furniture financing can increase your debt level and affect your cash flow. It would help if you were careful not to overextend yourself or take on more debt than you can afford. Too much debt can also lower your credit score and make it harder to qualify for other loans or credit cards. You can calculate your Debt-to-Income ratio (DTI) now using our calculator.
One of the question I often encounter is Should You Use a Credit Card to Buy Furniture? Read this to get answer, if you also have the same question in your mind.
5. Quality
Furniture financing may tempt you to buy more expensive or luxurious furniture than you need or want. You should consider the quality and durability of the furniture you finance and whether it matches your lifestyle and needs. Buying low-quality furniture that breaks down easily or goes out of style quickly can waste money and resources. It would help if you looked for solid frame furniture, sturdy joints, durable upholstery, and a good warranty.
What are some alternatives to furniture financing?
Some alternatives to furniture financing are:
- Saving up and paying in cash: This is the most cost-effective and risk-free way to buy furniture, as it avoids interest, fees, and debt. However, it requires patience and discipline and may not be feasible for urgent or large purchases.
- Borrowing from friends or family: This can be a low-interest or interest-free option as long as the borrower and the lender agree on the terms and conditions of the loan. However, it can also strain the relationship and create awkwardness or resentment if the borrower fails to repay on time or in full.
- Renting or leasing furniture: This can be a convenient and flexible option, as it allows the buyer to use the furniture for a fixed period and then return it, exchange it, or buy it. However, it can also be more expensive in the long run, as the rental or lease fees may exceed the value of the furniture. Additionally, the buyer may have to pay for damages or repairs if the furniture is not in good condition when returned.
- Using a layaway plan: This payment plan allows the buyer to reserve the furniture at the store and pay for it in installments until the full price is paid. Then, the buyer can take the furniture home. However, this option may involve fees, such as service fees or cancellation fees. Moreover, the buyer may lose the furniture or the payments if they miss a payment or change their mind.
Furniture financing got you confused? Don’t stress, check out our guide, packed with tips and tricks to get you there without breaking the bank.
Conclusion
Furniture financing can be a convenient, affordable, and flexible way to furnish your home. However, it also has some drawbacks, such as interest, fees, credit impact, debt, and quality. Whether you choose to finance your furniture or not, you should weigh the pros and cons carefully and make an informed decision that suits your needs and budget. Before signing any contracts, you can also compare financing options and read the terms and conditions. What are your thoughts on furniture financing? Also read our articles on 7 Best Furniture Financing Options: Pros, Cons, and Tips