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Furniture Loan: Does It Make Sense For You?

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Whether you’re shopping for a new bedroom set or a living room couch, you’ve probably experienced sticker shock over the price of furniture these days. The cost of purchasing several new pieces of furniture at one time – when you’re remodeling or filling a new house – can be daunting.

Paying for furniture out of pocket may be a good option for those who can afford it, but there are alternative payment methods available. In this article, we’ll review the pros and cons of taking out a furniture loan, as well as other ways to finance a large furniture purchase.

What Is A Furniture Loan?

A furniture loan is a type of unsecured loan that can be used to finance any kind of furniture purchase. Some loan lenders offer “furniture loan” options, but the term usually refers to using a personal loan to pay for new mattresses, couches or any other type of furniture.

How Does A Personal Loan For Furniture Work?

If you choose to take out a personal loan to cover the cost of new furniture, you can apply for funding through a traditional bank, online lender or credit union. Since most personal loans are unsecured, you’re not required to put down collateral to secure the loan.

If you’re approved for a furniture loan, the next step is to review your loan terms, which includes information about your term length, fees and interest rate. The current interest rates for personal loans vary between 6 – 36%, which is set based on your credit score, income and other financial factors. 

After receiving your lump-sum payment, you’ll begin repaying the loan amount in monthly installments and continue for the life of the loan.

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The Pros And Cons Of Using A Personal Loan For Furniture

Before you apply for a furniture loan, it’s important to understand the benefits and drawbacks of this payment method. Let’s review the pros and cons of using a personal loan to pay for furniture.

The Pros Of Using A Personal Loan For Furniture

  • Fast funding: Once you’ve been approved for a personal loan, you can typically collect the payment within a few business days. This means that you’ll be able to quickly access the funds to pay for your furniture and bring it home sooner.
  • Set payment schedule: Since personal loan terms are predetermined, you can adjust your budget to include the new monthly payment. Plus, making on-time payments may help improve your credit score, especially for borrowers with low credit scores.
  • Lower interest rates: When considering how to pay for new furniture, don’t forget to account for the added interest payments. Luckily, personal loans usually have lower interest rates than high interest credit cards. Keep in mind that competitive interest rates are only available to well-qualified borrowers.

The Cons Of Using A Personal Loan For Furniture

  • Higher total cost: Since personal loans require you to repay the loan amount plus interest, you’ll end up paying much more than the original price for your furniture. That’s why it’s important to calculate the amount of interest you can expect to pay before signing on the dotted line.
  • Non-essential debt: Although you want your home to feel comfortable, it’s not essential to take out a loan to pay for furniture. You’ll be stuck paying off the furniture for months, if not years, and unable to put that money toward more necessary purchases, such as a house or a car.
  • Personal loan fees: A major downside to personal loans is that most lenders charge additional fees. In addition to your monthly payment plus interest, you can also expect to be charged an origination fee and sometimes even prepayment penalties.

How Do You Finance Furniture Without A Loan?

If you don’t think furniture loans are right for you, there are several other financing options to consider instead. Let’s take a look at some other ways to finance your next furniture purchase.

Consider In-Store Financing

When you’re shopping at a furniture store, you’ll likely hear or see offers to pay using in-store financing. This is a common way to finance furniture, and it will require you to apply for credit at that store.

Most in-store financing programs allow qualified borrowers to finance their purchase for 0% APR for a preset amount of time. The benefit of this payment method is that you can avoid paying interest if you settle the debt before the introductory period ends. Plus, you can take your furniture home sooner.

But the major red flag of this payment option is that your interest rate will skyrocket after one missed or late payment. Be sure that you can afford to take on the monthly payment for the furniture before using in-store financing.

Open An Interest-Free Credit Card

If you’re determined to avoid paying interest on your new furniture, another option is to open an interest-free credit card. Like in-store financing offers, 0% APR credit cards allow borrowers to open a line of credit with a zero-interest introductory period.

The ideal way to use this payment method is to pay off the credit card debt before the end of the introductory period, which can last up to 2 years. That way, you’re able to spread out your payments on the furniture and avoid paying interest. However, if you still have an outstanding balance when the introductory period ends, be prepared to pay back interest.

Use The Furniture Store’s Layaway Program

Along with in-store financing, some furniture stores offer layaway programs as an additional payment option. Once you choose one or multiple pieces of furniture that you’d like to buy, you can reserve them on layaway, meaning that the store will hold them until you pay off the total in installments. It can be difficult to find furniture loans for people with bad credit, which is why layaway programs are a viable option.

Although most layaway programs don’t charge interest, there are several drawbacks to this payment option. You may be required to pay a down payment or a one-time fee before you start making payments. Plus, if you change your mind after putting the furniture on layaway, most stores charge hefty fines.

Pay With Cash

As mentioned above, using your personal savings is the easiest way to pay for new furniture. This payment method eliminates the need for additional lines of credit, interest or fees.

If you’re planning a home project that requires new furniture, such as creating the ideal work from home office, consider putting money aside in a designated savings account. Or research budgeting or money-saving apps that can help you work toward your financial goal.

How To Get A Furniture Loan

Ready to apply for a furniture loan? Let’s review the steps to take before applying for this type of credit.

  1. Check your credit report: When you apply for a personal loan, you want to put your best financial foot forward. Double-check that your credit report is accurate and updated, and be sure to correct any errors before submitting your application.
  2. Compare interest rates when shopping for loans: To make sure that you’re getting the best loan terms possible, shop around to multiple lenders to find the lowest interest rate.
  3. Prequalify for a furniture loan: Once you’ve narrowed down your options to a handful of loan lenders, prequalify to receive details about your loan amount and terms. Typically, this step will not affect your credit score.
  4. Apply for a furniture loan: To apply for a furniture loan, you’re required to submit several pieces of financial paperwork as part of your application. Be prepared to supply copies of your bank account statements, tax forms, recent pay stubs and other personal identification materials.

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Final Thoughts

If you have your heart set on a piece of furniture and need funding fast, a furniture loan is a viable option. Using a personal loan to purchase furniture allows you to take home your pieces sooner, and then pay for it over the course of the next several months. When making your loan decision, be sure that you’re financially prepared to fulfill the monthly payments.

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