Personal loan vs. the store’s no-interest loan for furniture

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Published on September 23, 2024 | 5 min read

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Couple looking at items in a furniture store

Key takeaways

Some furniture stores offer in-store financing to pay for furniture over a specified period.
You could also use a personal loan to pay for your furniture.
Personal loans generally come with lower interest rates than in-store financing.
Before you choose either option, compare the pros and cons and costs.

Coming up with the cash to pay for new furniture can feel like a daunting task, especially if you just moved into a new home. After all, the average cost to furnish a 3-bedroom home ranges from $10,000 to $40,000, according to HomeGuide.

Fortunately, many furniture stores offer in-store financing options that give customers ways to pay for new furniture over time. A second option is to take out a personal loan, which typically has a lower interest rate than the financing offered through a furniture store.

How furniture financing works

Furniture financing involves taking out a loan to cover the purchase price of the new furniture. With furniture loans, you don’t have to cover the full price of the furniture when you take it home. Instead, you can stretch out the payments over time.

The two most common methods of financing your furniture are personal loans and in-store financing. This table highlights some key differences between these two financing options.

	In-store financing	Personal loans
Annual percentage rates	Up to 29.99% if not paid off during the promotional period	8% to 36%, depending on the lender
Interest-free period?	Possible	No
Loan terms	Varies	Typically one to seven years
Credit requirements	May not need good credit since loan is secured by the furniture	Good credit required to qualify for lowest rates
Is collateral required?	Furniture may be used as collateral to secure the loan	No

No-interest in-store furniture loan

When a store advertises 0 percent interest rates, the loan isn’t completely interest-free. An interest rate is attached to the loan, but payment of the interest is waived if you follow the terms of the financing to the letter.

This means you must make your monthly payments on time and pay off the loan within the promotional period. These promotional periods usually last between six months and three years.

If you miss a payment or you don’t pay off the loan in time, you will be charged for all the deferred interest that was previously waived. For example, if $400 of interest was waived during the no-interest period and you failed to pay the loan in full before the promotion expired, you’d have to pay $400 in deferred interest.

The interest rates for this type of loan can be as high as 29.99 percent. That’s on par with a bad-credit personal loan or average retail credit card rates. The latter averaged a record high of 30.45 percent as of September 2024.

Benefits

Potentially interest-free: Financing a costly furniture purchase without paying interest is the main benefit.
High interest rates: If you end up paying interest, rates can reach almost 30 percent.

Drawbacks

May not be interest-free: If you don’t pay the loan in full or miss a payment during the interest-free window, you may have to pay deferred interest.
High interest rates: Interest rates can reach almost 30 percent if you miss a payment or don’t meet the terms.

Personal loans for furniture

Personal loans are available through traditional banks, credit unions and private lenders. If approved, you’ll receive the funds in a lump sum that you can use however you’d like.

You’ll repay what you owe in equal monthly installments over a set period, typically between one and seven years. That’s longer than the typical in-store promotional period. You will have to pay interest with a personal loan. But unlike in-store loans, personal loan interest rates vary depending on your credit score — and if you have excellent credit, your rate may be in the single digits.

You may want to get prequalified before you start shopping. This won’t hurt your credit score and allows you to know the loan amount and interest rates you could qualify for. The current average personal loan rate is just above 12 percent, but you may need a credit score above 640 to qualify for such rates.

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How to get the best loan for furniture

By researching your financing options in advance, you may discover the best way to pay for your new furniture.

Weigh the pros and cons of in-store financing versus a personal loan: Calculate your monthly payments with each method and see whether they fit your budget.
Factor in the fees and interest: Consider interest and fees for each option and be realistic when determining if you can pay off an in-store loan by the end of the promotional period.
Don’t settle for the first offer you get: Check the options available at other stores and with other lenders to get the best offer available to you.
Check for long promotional periods: Find a retailer that offers a program with an extended promotional period if you go with in-store financing. This way you have enough time to eliminate the balance before the interest kicks in.
Explore bad credit options: If your credit isn’t in the best shape, look into bad credit loan options. Some lenders may offer more competitive interest rates and lower fees than in-store financing options.

Other ways to pay for furniture

Using in-store financing or personal loans aren’t the only options to pay for furniture.

Buy now, pay later (BNPL): Services like Afterpay and Klarna partner with retailers to offer payment plans. Some BNPL plans have no interest, while others include interest, but don’t have late or surprise fees.
Credit card: You may be able to use a credit card with a 0 percent interest rate for a set time. If you haven’t paid off the balance after the promotional period, you’ll be charged interest on the remaining amount.
Rent-to-own and in-store layaway: This is another option for people with poor credit. You pay a rental price for the furniture until you pay it off. However, the interest rate with this method is typically high. Some furniture stores also offer layaway plans for a fee, but you can’t take the furniture home until you’ve paid it off.
Shop secondhand: Thrift stores and consignment shops often have gently used furniture for a much lower price than brand new pieces.
Borrow money from friends: Borrowing from a family member or friend can be an interest-free option. But make sure you both agree to a payment plan so you don’t harm your relationship.
Wait: Getting new furniture can be great, but if it puts you in financial jeopardy, consider waiting until you have enough money to pay for it in full. Creating a budget for the purchase will pay off in the future.

The bottom line

Buying furniture can be expensive. Having the option to make monthly payments through a personal loan or in-store financing could ease the strain on your budget.

Before heading out to the furniture store, research all your options to choose the best payment method for your financial situation. If you choose a personal loan, make sure to compare rates, terms and fees across multiple lenders to get the best deal for your financial circumstances.