Is furniture finance a good idea?

Need to furnish your home but don’t know how to pay for it? Is furniture finance the way to go?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Working out how to pay for big ticket items can often be tricky, and paying for furniture often falls into this category. Whether you are setting up your first home or just giving your home a little refresh, paying for a new sofa or bed is money you wouldn’t normally be spending.

So if you don’t have enough monthly disposable income or savings stashed away to cover the cost of furnishing a home, is furniture finance the way to go?

What is furniture finance?

Furniture finance is typically interest-free credit that you repay over an agreed term. How long the interest-free period is and how much the repayments are will depend on what the retailer is offering, how much you are spending, whether or not you pay a deposit and how long you will make your repayments for.

Retailers typically offer credit through a financial services provider. As this finance is a form of credit, a credit check will take place as part of the application process, meaning there is no guarantee that you will be accepted. Obviously, the better your credit score, the more likely it is you will be successful in your application.

Is it a good idea?

Taking on further debt should always give pause for thought. While the temptation may be to sign up to an interest-free product, doing so does have its pitfalls. Here are a few things to think about:

  1. You may be tempted to overspend. If you are not paying the full amount for a sofa or bed or table up front, it may be tempting to go above your budget.
  2. You will be taking on more debt. Having multiple loans and credit accounts can affect your credit score.
  3. You are making a monthly financial commitment, which in turn will impact your disposable income.
  4. If you miss any repayments, you could negatively impact your credit score.

Furniture finance or 0% credit card?

If you think that interest-free store credit is not for you, you could consider using a 0% purchases credit card to fund your purchase. These credit cards have an interest-free introductory period on anything you buy with the card, meaning you could buy your furniture item and pay it off over time.

The benefit of a 0% purchases credit card versus furniture finance is that you will typically have more flexibility in your repayments. Most of the time with a furniture finance scheme you will have a set repayment schedule over a period of time. However, with a credit card you can decide when and how much to repay.

The key with a 0% purchases credit card is to try to pay off your balance in full before the end of the interest-free introductory period, otherwise any remaining balance you have will be charged interest at the card’s standard rate.

It is also worth noting that 0% purchase credit cards do carry some of the same risks as furniture finance: it can be easy to overspend, multiple credit accounts can work against you, and missed payments can affect your credit score.

Verdict

It could be said that if you are considering buying furniture on credit, then you can’t afford it. If you are struggling to pay for a brand new item, then maybe look for something secondhand that could be more affordable or check whether friends or family have anything they could lend you.

If there is no other option but to buy new, then consider how much you are comfortable paying a month, how long for, and whether you can afford a deposit. Then also think about what debt you already have and whether you can afford to take on more repayments.

You may already have a credit card that offers interest-free purchases; if so, maybe utilise that facility. If, on the other hand, you want to go down the interest-free furniture-financing route, make sure you keep within your budget and think about the monthly repayments and how making these will impact your financial future in the longer term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

MyWalletHero, Fool and The Motley Fool are all trading names of The Motley Fool Ltd. The Motley Fool Ltd is an appointed representative of Richdale Brokers & Financial Services Ltd who are authorised and regulated by the FCA, and we are permitted in this capacity to act as a credit-broker, not a lender, for consumer credit products (our FRN is 422737). The Motley Fool Ltd does not have permissions for, and does not advise on, investment products and services, but may provide information on investment products and services.

The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. The Motley Fool has recommended shares in Lloyds, Tesco and Barclays.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »