Are you looking to finance furniture and are wondering if it will hurt your credit? Maybe you have just taken out finance on your furniture and want to know if your credit will go up or down? Whatever your reason might be, we have the answer for you!
Taking out finance to pay for items can be daunting. While spreading the cost over several months can save us the burden of searching for the money, we worry about making the payments.
Will another loan hurt our credit score? What happens if we can’t pay it back? We find ourselves lying awake at night, wondering and worrying about these questions and a million others.
Well, no more! Today we are here to put your mind at rest! Keep reading to find out if financing furniture will hurt your credit or not!
What Is Financing Furniture?
For those in the room that need it, let’s have a quick recap! Financing furniture is when you purchase furniture and take out a loan to pay for it.
Most furniture shops will allow you the option to spread the cost of the furniture. Payments will be spread over a period of time and are usually interest-free.
How long the finance will be for, and the amount varies depending on the retailer. You might have to pay a deposit such as $99, then pay $99 a month until the furniture has been paid off. There are usually a few different offers you can choose from depending on your situation.
Retailers will usually offer credit through a financial services provider. When applying, you will undergo a credit check to ensure you have a good score and pay the loan back.
Financing furniture is often a good way to buy your furniture if you cannot currently afford it. It allows you to spread the costs rather than making a large, one-off payment that is impossible for some people.
Now that we have covered what financing furniture is, let’s examine if it hurts your credit or not!
Does Financing Furniture Hurt Your Credit?
Financing furniture can indeed hurt your credit. While it can seem like a good idea at the time, it’s worth considering the risks that financing furniture poses to your credit score. The first is that having multiple loans and credit accounts can affect your credit score!
If you already have a few credit cards or loans you are paying back, adding a furniture finance agreement to your plate might be too much. Not only can it cause you to struggle to pay off your debt, but it will also have a negative impact on your credit score.
When it comes to securing another loan, lenders might consider you too much of a risk as you already have lots of payments to make. You might find it harder to get more loans in the future.
Also, if you miss any repayments, you can negatively impact your credit score. Most finance agreements will have a late payment and missed payment fees which can land you in further debt. If you miss a payment, it will impact your credit score.
A missed payment will also flag up in future credit checks and hinder your chances of being approved for future loans. Although most furniture finance is interest-free, these fees can add up and leave you with an added financial stress!
Ensuring that you make your payments in full and on time is the best way to avoid these charges and ensure that your credit score is not damaged in the process. It will also help you to clear through the debt quickly and allow you to enjoy your furniture stress-free!
If you do find yourself struggling to make your payments, be sure to speak to the lender. There are often ways to reduce the monthly payments to make it easier to pay the loan.
Usually, your credit score won’t take much of a hit if you do this. Lenders prefer this, as they will still get their money, and you don’t need to worry about the repercussions.
Failing to make payments can cause you to default on the loan. Your debt might be passed to a collections agency that will require payment, or they might take your furniture to accrue the money.
In these cases, if the furniture sells for less than the loan’s value, you will be expected to make up the difference. There can also be interest and other fees attached to this.
To prevent your furniture finance from damaging your credit score, ensure that you can afford to make the payments (check your budget beforehand) and make all your payments on time.
Is Financing Furniture A Good Idea?
So, is it a good idea to finance your furniture? For many people, it can be! It will allow you to spread the payments over several months or years and get your furniture when needed.
It can also help you build your credit, providing you make your payments on time and in full. If lenders can see you have managed to repay the loan in full without any missed payments, they are more likely to lend you money and provide you with access to larger loans.
However, financing furniture isn’t always a good idea. Too many debts to pay each month can stretch your budget thin, leaving you with little money to live off. It can even cause you to accrue more debt as you try to pay for your essentials.
Before taking out any finance, be sure to check your budget to ensure you can afford the monthly payments. Make sure there is enough money in your budget to pay all your debts to avoid leaving yourself with little money to live off.
Financing furniture can often tempt people to overspend. The allure of not needing to pay immediately can tempt you to treat yourself and splurge for the more expensive sofa.
But doing so means you will need to spend more money than you can afford, leaving you with larger monthly payments to make or longer to pay the loan off.
Stick to your budget as best as possible to ensure you can always afford the repayments.
If financing furniture doesn’t sound like the right idea for you, you can also spread the cost of your furniture on a 0% credit card. These cards will offer you a 0% interest rate for a period of time, such as six months or a year.
There tends to be more flexibility with these payments, allowing you to pay what you can for your furniture. The flexibility is a fantastic option for many people; just be sure you have paid the full amount before the interest-free period ends, or you will be hit with interest charges!
And there you have it! Financing furniture can hurt your credit, but you should be fine if you make your payments in full and on time.
For those who need to spread their furniture’s cost, financing it or buying it on an interest-free credit card is an excellent option. Just be sure to read the fine print before you sign anything!