Financing Options for Furniture: Key Considerations in 2024

Financing options are a common way to manage large furniture purchases, allowing you to spread payments over time. However, it’s important to fully understand the terms, costs, and impact on your finances before committing.

Key Financing Terms to Know

1. APR (Annual Percentage Rate): This is the interest rate you’ll pay on your financing over a year. A lower APR means lower overall costs, but many retailers offer 0% APR promotions for a limited period.
2. Deferred Interest: Some financing options offer deferred interest, meaning you won’t be charged interest if you pay off the balance within a specific period. However, if you miss the deadline, interest will be retroactively applied to your entire purchase.
3. 0% Financing: Many furniture retailers offer promotions where you can finance your purchase at 0% interest for a set number of months. While this can save money, be cautious of high-interest rates that may apply after the promotional period ends.
4. Credit Score Impact: Financing may require a credit check, which can temporarily lower your score. However, making payments on time can improve your credit over time.

How to Evaluate If You Can Afford Financing

When considering financing, evaluate your monthly budget to ensure the payments are manageable. Factor in how much you’ll pay in interest if you don’t qualify for 0% APR or if you can’t pay off the balance before the promotional period ends. It’s also crucial to calculate the total cost of financing. If you can pay upfront, this might save you more in the long run, as financing can add to the overall cost.

When Is Furniture Financing Worth It?

1. 0% APR Promotions: Financing is often worth it when you can take advantage of 0% APR promotions. Just be sure to pay off the balance within the promotion’s terms to avoid retroactive interest.
2. Big Purchases: If you’re making a large purchase that would otherwise be a strain on your budget, financing allows you to spread out the payments over time without having to compromise on the quality of furniture.
3. Investing in Quality: Sometimes, financing allows you to purchase higher-quality furniture that will last longer. This can save money in the long run compared to settling for cheaper items with a shorter lifespan.

Scenarios Where Financing May Make Sense

1. Large, High-Quality Purchase: If you're buying a high-quality item that’s built to last, financing can help you invest now rather than settle for a cheaper option that might not hold up.
2. 0% APR Promotions: Financing is often worth it when you qualify for 0% APR promotions. If you can pay off the balance before interest kicks in, this allows you to spread out payments without extra costs.
3. Spreading Out Essential Purchases: If you need multiple pieces of furniture at once, financing can help distribute the cost over time without draining your savings.

Scenarios Where Financing May Not Make Sense

1. Short-Term, Disposable Furniture: If you're purchasing inexpensive, short-term furniture, financing might not be worth it. Paying interest on lower-quality pieces could result in you paying more than the furniture’s value.
2. High Interest Rates: If you don’t qualify for a low or 0% APR and the interest rate is high, the cost of financing may outweigh the benefits. In this case, it may be better to save and pay upfront.
3. Uncertain Financial Situation: If you’re not confident in your ability to make consistent monthly payments, financing could lead to missed payments, fees, or higher costs from deferred interest.

What to Look Out For

1. Hidden Fees: Some financing agreements include hidden fees, such as late payment penalties or early repayment fees. Make sure you understand any extra charges that could affect the total cost.
2. Deferred Interest: Be aware that deferred interest promotions require you to pay off the balance within a specific timeframe to avoid paying interest. Missing this deadline can lead to a significant increase in your total cost.
3. Variable Interest Rates: If the financing deal includes variable rates, check how the rate might change after the introductory period. Be prepared for higher payments if the interest rate increases.
4. Store Credit Cards: Many furniture stores offer store-specific credit cards for financing. While these often come with perks like rewards or 0% APR, they may also have higher interest rates after the promotion ends.

Questions to Ask Before Financing

• What is the total cost of the purchase with financing?
• What is the interest rate or APR after the promotional period?
• Are there any fees for late payments or early repayment?
• How long is the 0% interest period, and what happens if I don’t pay off the balance in time?
• How will this affect my credit score?

Retailer Credit Cards and Furniture Financing

Many furniture retailers, including Wayfair, Amazon, West Elm, and Ashley Furniture, offer their own store-branded credit cards as part of their financing options. These cards often come with promotional offers like 0% APR for a set period, reward points, and other perks like exclusive discounts.

How Store Credit Cards Relate to Financing:

• Promotional Financing: Retailer cards frequently offer 0% APR for 6-24 months, making them an attractive option for financing large purchases.
• Rewards Programs: Some store cards provide points for every dollar spent, which can be redeemed for future purchases.
• High-Interest Rates: After the promotional period, the interest rates can be quite high (often 20%+), so it’s important to pay off balances before the promotion ends.
• Credit Score Impact: Like traditional financing, applying for a store credit card may result in a hard credit inquiry, potentially lowering your credit score temporarily.

When to Consider Retailer Credit Cards

• If you’re confident you can pay off the balance within the promotional 0% interest period.
• If the card’s reward program aligns with your long-term shopping habits and can offer meaningful benefits.
• Be cautious of high APRs that apply after promotional periods end and ensure you understand the terms before signing up.

Financing Options at Major Furniture Retailers

• Amazon: Offers financing through the Amazon Prime Visa, often with 0% APR promotions on select furniture.
• Wayfair: Provides multiple options, including the Wayfair Credit Card with 0% APR promotions and financing through PayPal.
• Ashley Furniture: Frequently offers 0% APR financing for up to 60 months on qualifying purchases.
• Crate & Barrel: Their credit card offers financing options and reward points on purchases.
• West Elm: Financing is available through the West Elm Credit Card, often with 0% APR for larger purchases.
• Target: While Target doesn’t offer specific furniture financing, the Target Circle Card provides 5% off purchases, which can help reduce costs.
• IKEA: The IKEA Projekt Card offers financing options for large furniture purchases with flexible payment terms.
• Raymour & Flanigan: Offers a variety of special financing deals, including 0% interest for up to 60 months on certain purchases.

Buy Now, Pay Later (BNPL) vs. Traditional Financing

Buy Now, Pay Later (BNPL) services, like Afterpay, Klarna, or Affirm, allow you to break down your purchase into smaller installments without a credit check or long-term commitment. BNPL is often available at checkout with a minimal or 0% interest rate for shorter terms, typically 4-6 weeks.

Buy Now, Pay Later at Major Furniture Retailers

• Amazon: Offers BNPL through Affirm, allowing for flexible payment terms ranging from 3 to 48 months, with no late fees.
• Wayfair: Partners with Affirm and Klarna to provide BNPL options, often offering 0% interest for shorter terms.
• Ashley Furniture: Offers BNPL via Affirm and Progressive Leasing, with payment plans that can extend up to 12 months.
• IKEA: Provides BNPL via Klarna, with flexible installment options.
• Target: Uses Affirm and Sezzle for BNPL, focusing on small monthly installments.

How BNPL Compares to Traditional Financing:

• BNPL: Best for small or mid-sized purchases with no interest over a short period. It’s quick and easy, often requiring just an approval at checkout.
• Traditional Financing: Typically used for larger purchases, spread out over longer periods (6-60 months). Financing may involve interest, especially after promotional periods, and is better suited for big-ticket items.

When to Choose BNPL

• For smaller purchases that you can pay off quickly.
• When you prefer minimal interest and quick repayment terms.

When to Choose Traditional Financing

• For larger purchases that require extended payment plans.
• When you qualify for 0% APR promotional offers or need more time to pay off a significant expense.

Both options offer flexibility, but BNPL works better for short-term repayment, while traditional financing provides long-term affordability for larger investments.

Conclusion

Furniture financing can be a smart way to manage large purchases, but it’s important to understand the terms and assess your financial situation. By being informed about key factors like APR, deferred interest, and repayment terms, you can make better decisions.

Spoken can help you stay up-to-date on the best financing deals and compare prices across retailers, ensuring you make well-informed choices. Use Spoken to track offers, monitor sales, and find the best financing options for your next furniture purchase.