Best Furniture Financing: Review These 6 Options

Whether you’ve just moved or need to replace an old, sagging sofa, it can be fun to shop for new furniture. But furniture can be expensive, so some shoppers want to finance their purchase. While many retailers offer in-store financing, there are other options that may come with better rates and terms to reduce the total out-of-pocket cost. Read on to learn about six of the best furniture financing methods available to consumers before you make your final decision.

How does furniture financing work?

With most forms of financing, you borrow the money for your purchase, then pay the money back with interest over a specific period of time. Interest rates vary based on your creditworthiness, and the higher the annual percentage rate (APR), the more you’ll pay overall. Therefore, the best way to save money on your furniture purchase is to pay cash. Although this is the cheapest option, you won’t build your credit history by paying cash.

If you don’t have enough money saved to purchase the furniture you need, you may want to consider ways to finance furniture that offer long introductory periods with 0% APR, such as in-store financing and certain credit cards. Bear in mind, however, that if you can’t repay the entire amount before this period ends, you’ll be responsible for the accruing interest on your balance, increasing your total cost of borrowing.

Both traditional personal loans and secured loans, in which the loan is backed by some form of collateral, can offer better interest rates and terms than credit cards. The terms may depend on your credit score, so check your score before applying for a loan.

If you have poor credit and belong to a federally insured credit union, a payday alternative loan (PAL) may be worth considering. PAL interest rates are higher than the other options, but they’re accessible to bad-credit borrowers. A long history of on-time payments can help build your credit, but PALs only offer terms up to 12 months so they may not help as much as other options.

6 best furniture financing options

Whichever financing method you choose, consider the pros and cons before making your purchase.

Paying cash

• Who it’s good for: Those with sufficient cash saved
• Credit check: No
• Credit needed: None

Paying in cash is the best way to save money on your purchase. That’s because it avoids the typically high interest charges and fees that are added onto the original cost of furniture when you use financing. Paying cash also provides peace of mind since you know you aren’t taking on debt and you own your new furniture outright.

Using savings entirely may not be a realistic option for everyone, however, especially if you are saving for other purposes. Also, if you’re hoping to build your credit with a history of on-time payments, paying cash won’t help you accomplish that goal.

In-store financing

• Who it’s good for: People who can pay off the balance before the 0% APR promotional period ends
• Credit check: Yes
• Credit needed: Poor to excellent credit

In-store financing can be a solid option for those with existing credit because it gives you access to 0% APR financing for a set period of time. Those with poor to excellent credit scores may qualify. If you can pay off your balance before the promotional period ends, you’d only pay the cost of the furniture, so this option saves money compared to a personal loan or a credit card without a 0% APR period.

One well-known option, for example, is Ashley Furniture’s financing program. It offers 0% APR promotions ranging from six to 60 months, depending on the cost of the item. Once the promotional period is over, the 29.99% interest rate would retroactively apply to any remaining balance.

Credit card

• Who it’s good for: Those who want a quick funding option and can pay off the balance before the introductory 0% APR period ends (offered by some credit cards)
• Credit check: Yes
• Credit needed: Good to excellent credit

If you already have a credit card with a high enough credit limit to charge your new furniture, this can be a quick and easy way to fund your purchase. If you can pay off the balance before your next statement, you can avoid any interest charges.

Obtaining a new credit card with a 0% promotional APR period can also be a solid option. However, you usually have to have good to excellent credit to qualify, depending on the card. During the introductory period, you wouldn’t have to pay any interest, but once the promotional period ends, you’d have to start making interest payments. Some credit cards may retroactively charge interest on the remaining balance, though not all do; be sure to read the fine print for the offer.

Personal loan

• Who it’s good for: Those who want a flexible loan and quick access to cash
• Credit check: Yes
• Credit needed: Good to excellent credit

A personal loan is an unsecured loan that can be used for a wide variety of purchases. You make monthly payments for a predetermined number of months, and you would typically pay interest at a fixed rate, as well as any fees associated with that particular loan. Some personal loans come with origination fees, although many do not.

In general, the better your credit, the better the terms of the loan. Because there is no collateral securing the loan, lenders heavily weigh your credit score and financial history. This means it may not be the best option for everyone, as those with poor credit scores may end up paying much higher rates or struggle to qualify.

Rate shopping and comparing the terms and fee schedules of personal loan options is an important part of the pre-application process. One option is to use a personal loan calculator. There are reputable lenders who will work with borrowers with bad credit, so be sure to shop around.

Secured loan

• Who it’s good for: Those who are comfortable with putting up collateral
• Credit check: Yes
• Credit needed: Bad to excellent credit

Secured loans are generally easier to access than personal loans. Because the loan is backed by collateral (such as a house or savings accounts) that the lender can seize if you are unable to pay, borrowers with lower credit scores may have a better chance at qualifying and the interest rates may be lower than they’d be for unsecured loans.

In general, however, these loans are not always a great option since they require you to put up your existing assets as collateral. If you miss a payment, you could lose your collateral. But for those who don’t have great credit and are confident that they can stick to the repayment schedule, this may be an option to consider.

Payday alternative loan (PAL)

• Who it’s good for: Credit union members who aren’t able to qualify for other financing options
• Credit check: Dependent on the credit union
• Credit needed: None

Payday alternative loans (PALs) are offered by federal credit unions as a safer alternative to predatory payday loans. They are very short term, with terms of one to twelve months, with amounts up to $2,000. In addition to interest payments, the credit union may also charge an application fee of up to $20 for these loans.

PALs are designed to be easier to pay off than a standard payday loan. However, with an APR of up to 28%, PALs may be more expensive than a credit card. Additionally, you’ll have to be a credit union member, sometimes for at least a month, to qualify for a payday alternative loan. Not all credit unions offer PALs, so finding one can sometimes be a challenge.

Options to avoid

Payday loan

Payday loans are short-term loans that are typically repaid on your next payday. They are available to borrowers with no credit or poor credit.

But beware: these loans come with extremely high interest rates, which can be as high as 400%, and the lending practices are often predatory. The payments are thus extremely high for the amount borrowed. Payday loans can be dangerous, trapping borrowers in a cycle of debt, having to obtain new payday loans to pay off the old. For the vast majority of people, payday loans are not a good option and should be avoided at all costs, especially for purchases as non-essential as furniture.

Any financing option you can’t afford

When assessing financing options, it’s important to look at how much you’ll pay monthly and whether you can comfortably afford it. If you can’t reliably make the payments, you may have to wait to buy that new couch. Be sure that you make the right decision for YOUR needs and financial situation.

Best furniture financing options: FAQ

What credit score do you need for furniture financing?

There’s no specific score required for furniture financing. Both a 0% APR credit card and a personal loan, for instance, may require a good to excellent credit score, of 670 or above. Financing through the store may be available if your credit score is fair. To qualify for lower-cost financing options, it might be worth it to work on improving your credit before making your purchase.

How can I finance furniture with bad credit?

If your credit is poor, you have several options. Saving your money and paying cash is the cheapest option. Alternatively, you could shop around for a lender that will approve you for a secured loan. There are credit cards designed for borrowers with bad credit, but they typically come with high APRs. Both these financing options can help you build your credit.

Is it a good idea to finance furniture?

As long as the payments fit into your budget and you choose a zero- or low-interest option, financing a furniture purchase can help build your credit if you make your payments on time. However, paying cash upfront is the cheapest option.

Methodology

LendingTree selected six preferred methods for financing furniture based on what we believe would be most feasible for the average borrower in terms of affordability/average interest rate and ease of access to funds. The methods we looked at included (but were not limited to) cash, credit cards, crowdfunding, in-store financing, secured personal loans, unsecured personal loans, payday loans, payday alternative loans, trade-in programs, and soliciting money from family and friends. Note that the six methods we selected were based on what we thought a typical borrower would find easiest and most attractive financially — some consumers may in fact benefit more from one or more of the methods we chose not to include.