The answer for many households is new furniture. Maybe you need an entirely new household of furniture. Maybe you just want a few signature pieces to spruce up the dining room.
Either way, the truth is that furniture is expensive. Williams-Sonoma, the retailer of high-end home furnishings, for example, had net revenues of a whopping $1.582 billion in the fourth quarter last year.
If you have just drained your account with other household expenses, you may think there’s no way you can afford anything else. The pieces you want may be above the limit for your credit card as well.
This is precisely why thousands of Americans take out loans each year to buy furniture. Here are some things you need to know about getting the best rates on those loans.
Take out a personal loan
One option is to take out a personal loan to finance furniture purchases. You can get a personal loan from lenders like banks or third-party firms. Most people use these loans to pay for necessary expenses, such as education or consolidating debt, but they can be used for pretty much anything.
The best way to qualify for favorable terms on a personal loan is to make sure you maintain good credit. The terms of a personal loan are usually more favorable to those of a high-interest credit card.
If you have good credit, it can be easy to get a personal loan.
Personal loans are given in lump sums, which you will pay back in monthly installments. Some feature fixed interest rates, and others have variable interest rates.
Fixed interest rate loans have the same interest rate throughout the lifetime of the loan. So, you’ll know exactly how much your monthly payments will be. It’s a good option to take a fixed interest rate loan when interest rates are low.
Variable interest rate loans typically have a lower interest rate to start. However, the amount will fluctuate throughout the life of the loan based on market interest rates. This makes it a more risky option than fixed-rate loans, as payment amounts are unpredictable.
But if the loan is relatively short–over one to three years, for example–it’s better to go with a variable interest rate loan. That way, you can take advantage of the low initial rate.
Find the best personal loan
Make sure you shop around and compare the different terms to determine what works best for your particular situation.
So before you make a decision, you first need to review and do a side-by-side comparison of all the top lenders. You can do that right here.
You can even see what rates you qualify for (and from which lenders) without hurting your credit score. That way, you’ll know what your options are before applying.
Use a credit card
You can also use credit cards to finance the cost of new furniture. What’s appealing about this option is that some credit cards offer nice reward perks. This makes it a little easier paying off the debt knowing you’re getting something in return.
However, using a 0% APR credit card is one of the best ways to use a credit card for a big purchase. These cards allow you to make payments on your purchase without being charged any interest for a set period.
Once the promotional period ends, however, you’ll begin to see interest charges. But if you can repay your debt before then, you’ll end up paying zero interest on your entire purchase.
What if you don’t have great credit?
While most personal loans are unsecured, you can apply for a secured personal loan. Lenders who offer these loans will require collateral equal to the loan amount to lessen the risk of lending to a low-credit customer. Like any loan that requires collateral, you risk losing your asset if you can’t pay back the debt.
Unsecured loans don’t require collateral. However, even if you do get approved for one, you’ll likely pay a much higher interest rate compared to a borrower with good credit.
Finance through a furniture store
Individual furniture stores will offer funding options, including buying today and paying in installments in the future. Some say they won’t look at your credit score before offering you funding. Others even say they offer a 0% interest rate on such loans.
However, make sure you read the fine print and understand all the terms before signing on to such a deal. For example, some furniture stores say that they offer 0% rates, but only within a certain window. If you don’t pay 100% of the debt off by a certain date, or if you miss a payment, you may be hit with fees or have the items taken away.
Here are Some Furniture Tricks
Not comfortable taking out a loan, but still want that furniture? Here are a couple last tips and tricks:
- Buy in February: Furniture usually goes on sale in February, when retailers clear out inventory for the season’s new designs.
- Buy used: Look in your neighborhood for any garage sales or people discarding unwanted furniture. Sometimes you can find slightly used pieces that work great with your decor.
Whatever you decide, it’s most important that you’re able to pay back your debt. That’s the key to continued happiness in your brand new, furnished home.
Andrew is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.