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. 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 6% 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 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. The interest rates for this type of loan can be as high as 29.99 percent.

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  • Potentially interest free: The ability to finance a costly furniture purchase without paying interest is the main benefit. Though it is contingent on you staying current on your payments and paying off the balance within the promotional period.
  • Looser credit requirements: You may not need good credit to qualify. Since the financing uses the furniture as collateral, the store may approve you for a loan even if you have a low credit score.
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  • May not be interest free: Interest is retroactively applied if you don’t pay the balance in full before the promotional period ends or if you make a late payment. Interest is calculated from the day of purchase and added to the outstanding balance.
  • High interest rates: Interest rates can reach almost 30 percent if you miss a payment or don’t meet the terms.

Personal loan

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. While not exclusively for furniture financing, personal loans could be beneficial for a few reasons.

You may want to get prequalified before you start shopping. This allows you to know the loan amount and interest rates you could qualify for and won’t hurt your credit score.

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  • Lower interest rate: If you have a good credit score, the interest rate you’re charged on a personal loan will likely be less than what the furniture store offers.
  • More spending options: Since you receive the funds directly, you can purchase your furniture from several stores.
  • No collateral required: The furniture you’re purchasing is not used to secure the loan. If you default on the loan, you won't lose the furniture.
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  • Interest begins immediately: Unlike the furniture store where you’re only charged interest if you don’t meet the terms, the interest payments on a personal loan start as soon as you receive the funds.
  • Origination fees: Most lenders charge a fee to create your loan. You may either have it added to the cost of your loan or have it deducted from the funds you receive from the loan.
  • Tougher eligibility requirements: People with poor credit scores may not qualify for a personal loan.

How to find the best financing deal

After purchasing a home and car, furnishing a home is one of the most expensive costs most people have. By researching your financing options in advance, you may discover the best way to pay for your new furniture.

  1. Weigh the pros and cons of in-store financing versus a personal loan: Calculate what your monthly payments would be with each method and make sure your monthly budget will accommodate that.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Bottom line

Buying furniture can be expensive. Having the option to make monthly payments could ease the strain on your budget and personal loans and in-store financing are two great ways to do this.

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 situation.