Financing splurges: Buy now, pay later
A home and a new car aren’t the only things you can buy with loans. There’s financing now for big-ticket items, such as vacations, engagement rings, even fertility treatments. Sure, it’s always better to pay cash, but buying a trip to Disney or a diamond ring on credit doesn’t necessarily mean stiff finance charges. Many retailers and even some lenders offer zero percent financing for six months to a year for purchases you might not expect.
“It’s a much more expensive way to go if you don’t pay it off right away,” says Kathleen Day, a spokeswoman for the Center for Responsible Lending in Washington, D.C. But she says, “If you’re careful, it can work in your favor.”
The lesson here? Make sure you can afford to pay off what you’re buying now. Joan Goldwasser, a senior reporter at Kiplinger’s Personal Finance magazine, says to consider how much the interest rate is adding to the cost of the item before taking out a loan.
“You don’t want to start borrowing money for relatively frivolous things,” says Goldwasser. “You’re better off taking a less-expensive vacation.”
Here are some of the unusual items that you can purchase with financing.
Low-interest loans for rest and relaxation
Yes, it would be better to save up all year for a family cruise or ski trip rather than take out loans. But for many Americans, that simply isn’t in the cards.
Goldwasser doesn’t advocate financing a vacation. If you’re going to do it, avoid putting it on a high-interest credit card, she says. Taking out a personal loan may be a better choice because the interest rates on those loans aren’t as high as they are on credit cards, says Goldwasser. The rate will vary based on your credit score and the lender, so it’s best to shop around.
An alternative is to join a membership club. These clubs give members access to interest-free loans to use on the club’s vacation packages. Players Vacation Club, a travel company in San Diego, offers financing of up to 80 percent for members who pay at least a 20 percent deposit and keep up with monthly membership fees. To qualify for up to a $3,000 line of credit you have to be 18 years old and a U.S. resident, and be employed for six months, have a valid checking account for six months and make a household income of at least $2,200 per month.
Financing options for fertility treatment
For a couple, few problems can be more heart-wrenching than the struggle to conceive. Today, modern science and financing make it possible for many couples to realize that dream.
Vicki Baldwin is president and chief executive officer of In Vitro Sciences, a company in Avon, Conn., that helps couples find a fertility treatment program and provides access to financing. Baldwin says treatment can cost around $10,000, not including roughly $3,000 for drugs. Some insurance companies cover fertility treatment, but many don’t. If your insurance company doesn’t cover it and you can’t afford to pay for it in full, one option is to finance it.
It usually takes more than one attempt to succeed, so some patients choose the multicycle refund program, says Baldwin. Under this plan, you finance three fresh cycles of in vitro and three frozen embryo transfers for $20,000 to $30,000, depending on your age. If you aren’t successful, you get up to 70 percent of the money back, according to In Vitro Sciences. An alternative is to finance the cost of each cycle by taking a personal loan. Interest rates on medical loans tend to be lower than those on credit cards, Baldwin says.
Pop the question at a zero interest rate
Think financing is difficult? Getting engaged can be a scary and expensive endeavor. Losing the commitment jitters is one thing, but coming up with the money to buy a ring is quite another. If cash is short, you can finance an engagement ring through the jeweler or rely on unsecured personal loans on your own. Still, retailers are more apt to offer zero percent financing for a period of time, assuming that you pay it back in the allotted time, says Day.
“Follow all the rules with zero interest offers,” Day says. “If you financed an engagement ring interest-free for six months and it’s not paid off at the end of six months, huge interest has been accumulating in the background.”
Pick up a bedroom set at low financing
Whether it’s due to a remodeling or your furniture is just plain old, buying new furnishings can be costly. If you don’t have the cash, you can still get that new sofa or bedroom set by financing the purchase.
Many furniture retailers will offer zero percent or low financing for a period of time, typically six months to a year. A lot of the retailers will offer the financing through third parties, such as GE Consumer Finance.
Just as with financing any big-ticket item, once the no-interest period is up, you’ll be hit with a high interest rate. “If you finance a big-ticket item, pay it off as quickly as possible,” says Day, who also says interest-free financing can be a smart move as long as you don’t let the interest accrue.