Hi, as the title suggests, my spouse and I are going to be closing on a house & we have a couple thousand set aside for furnishings. We aren't planning on furnishing absolutely everything since we have a lot of perfectly good furniture, just some more big ticket items like a bigger couch, bedframe & a few decorations. I have a 750 credit score & I have no debt (other than this future mortgage). In both cases we'd still have a decent emergency fund left over & we're not stretching to afford this house.
Edit: we're definitely going to be getting the furniture after closing since opening up new lines of credit beforehand is objectively a bad idea
Is it a bad idea to finance furniture at 0% interest if I can buy it in cash?
byu/Strong_Glove5989 inpersonalfinance
Posted by Strong_Glove5989
29 Comments
How soon are you closing? You don’t want to open a new line of credit right before closing.
It’s not necessarily a bad idea if you keep the money in a HYSA and earn a few bucks in interest, but for a couple thousand not worth the hassle IMO. Up to you.
However, this is almost certainly a deferred interest promo. Which means, if you owe one single penny when the 0% interest period ends, they go back and charge you interest from day one. If it’s 24 months no interest, pay that off in 21 months just to leave a buffer in case anything goes wrong.
Don’t finance anything until AFTER closing.
Then if you want it’s fine at 0%. Just allows you to pay it off over time versus giving up all cash now 👍
Are you putting that same amount into an interest generating account? Are there fees for financing the furniture?
As long as the interest gained from having that money in the account is more than any fees, financing it is fine.
Always do the 0% interest every time. But not until after closing.
It’s not worth opening a line of credit that u might forget about. If u can pay it, put it on a cc that gives you points and pay it off. If u forget about something stupid like that and ruin your credit it’s not worth it
Is this a serious question?
This is basic math 101.
Take money you’d pay for furniture and put it in a new, segregated hysa. Don’t co-mingke it. Use it for minimum payments but take the 3.whatever percent until you need to pay it off. Yes, you pay taxes on the interest but you keep most of it.
Finances are not difficult. People make a lot of money in life by not paying for something today that they can pay for tomorrow. All it takes is discipline and tracking.
Financing the furniture at 0% isn’t a bad idea if you can make sure you pay it down. My furniture card has like a 35% deferred interest rate, and watching that build up is like a threat to pay it off before the due date
While technically this may generate some money if you put the amount you’d otherwise spend in a HYSA, I personally find it a pain at my income level to do the min/maxing for maybe $40 (that’s being generous) worth of interest that you’ll still have to pay income taxes on.
As someone who has moved a LOT and owned two homes, it’s often really nice to stick with your own furniture for a while unless it’s something you absolutely know you’ll either need or have been wanting for a very long time. The reason is you have no clue what your actual preferences will be once you settle into a place. For example, I generally detest bulky and dark colored furniture. The original bedrame I had was a sleek, minimalist design with only enough headboard to protect the wall. It took about 4 years of wondering why my bedroom felt “off” to realize that the huge room with nothing but that barely there bed and nightstands in it made it look empty. I ended up buying a dark wood frame with under bed drawers and shelves built into the headboard and now the room looks correct. Also, it’s fun to use upgrades as treats, like for your anniversary you’ll find a new painting for the living room.
It’s not a bad idea. Figure out your budget for the items and don’t overspend though. Make sure to set up autopay and check the statement monthly just to make sure you didn’t misunderstand and are getting charged.
I use SoFi and you can name “vaults”. Put the equivalent of what you owe in that and you can gain interest. This can help visualize that you don’t actually have this money. It’s now a liability. You don’t need a vault to do this. A spreadsheet will do fine as well. When you start getting creative trying to take advantage of debt vehicles, it’s important to have some type of visual aid.
These furniture purchases are just a small part of the big picture with the home purchase. Please spend a lot of time coming up with a new budget and financial overview. While furniture is great for the house you now also would be wise to figure out what to put in a sinking fund for home maintenance. A lot of home owners conflate maintenance and improvements
I used to sell furniture: A ~~couple of~~ okay actually 3 things I would do:
1. Ask if there’s a cash discount. If it’s really 0%, fine. But if it’s 0% “financed price” versus “cash price” that’s worth taking into consideration.
2. Watch out for terms. The place I worked with would finance about anyone, but there were very different terms for different credit scores, and a lot of the loans would slap you with retroactive interest if you ever had a late payment or if you ran over the interest-free period even while making on-time payments.
3. Watch out for add-ons. There will be “offers” for everything from “credit protection” to “upholstery protection” and all of them are going to add onto your bill with different terms. Because they were “free cancellation” add-ons, the company actually encouraged sales staff to “just go ahead and add it on there as a free trial” and many people didn’t know (because our smarmy staff didn’t tell them) that they had to call and cancel it. So check your bill! My own take, after being in the industry, is I would decline all of that stuff. I can get an awful lot of homeowner’s insurance for the cost of “credit protection” and I didn’t see a lot of value in the upholstery or hardwood protection packages since they only covered “normal wear and tear”.
If you can’t get a cash discount, and if you read the terms and watch out for the crap, your money can do more for you in an HYSA or CD for the term.
I take advantage of 0% interest all the time on things I can buy in cash. Leaves those monies invested while I pat off a loan at no cost to me. Just be sure ypu pay in full before the 0 interest runs out.
If you’re buying before close pay cash. Never open new lines of credit before closing, you may tank your ability to close.
If you’re waiting until after close then it doesn’t really matter. If it’s some sort of 0% for X months then just make sure you pay it off before you’re hit with the interest. Personally I would just pay cash because there isn’t any real advantage to buying furniture on credit.
Mathematically, it makes perfect sense. If someone offers you a 0% loan, you might as well take it and invest your cash instead. You can get a CD or money market fund at ~4% today and pocket the difference. Free money, right?
Except that these 0% finance offers often have really punitive terms, like retroactive interest. I think this is the most common one I’ve read about. If you don’t pay off the balance in X months, they retroactively charge you the full amount of interest going back to the date of purchase.
Personally, I would ask if they offer a cash discount in lieu of the 0% financing. That seems like a good middle ground.
If you have the cash, try to find a different deal. For example:
I bought a 4k sectional at West Elm. They had a 10% off deal if you opened a new line of credit and paid with their credit card. Not only did I get 10% off the couch (which was already on sale), I got 350 West Elm points for the purchase on the credit card, which equates to $350 to spend at any West Elm or sister store (Pottery Barn, William Sonoma, Rejuvenation, etc).
I paid off the credit card immediately and used the $350 credit to get new bar stools. Closed the credit card and happily typing this message on my super sale couch.
Honestly I’d probably take the 0% just bc why not? Did this exact thing when we moved into our place – took the 0% on a $3k couch and just parked the cash in a HYSA earning 4%. Made like $120 over 18 months for literally doing nothing lol.
The trick is setting up autopay for the exact monthly amount so you never get hit with back interest. I calendar the payoff date too bc those “deferred interest” things will absolutely screw you if you’re even a day late.
Only thing is don’t go crazy adding more stuff just bc it’s 0%. My buddy did that and suddenly had like $8k in payments across 5 different furniture stores. Dude was sweating bullets when his company did layoffs last year.
I think it’s easier if you can do an intro 0% apr credit card, rather than via the furniture store directly. My husband and I have definitely used that method on several larger purchases we’ve made for our home. This is nice because you’re not opening multiple lines of credit at multiple individual stores, just one card that can be used for all of them. I’ve never sweated not paying off in time, because that’s just not a thing that I’d do. I check my credit cards every two weeks and I make at least 1 payment per month. I would figure out how much I need to pay per month, plus a few extra dollars to be safe and just pay that each month until it’s paid off. Ensuring that I definitely pay it off before the promotional period is over.
If you have good debt management habits…never pay cash with a 0% offer. HYSA that cash, setup autopay to pay it off 1 month early.
Store debt can hit your credit but your score is high enough it won’t really matter.
I haven’t bought furniture or electronics with cash in years…finance it at 0% and autopay…score stays 800+
They can’t borrow at 0% interest. So ask yourself, are they giving me free money because they’re nice, or are they jacking up the price and selling it back to you at 0%?
In very few exceptions would I recommend not paying off a debt or avoiding taking on debt. Just buy the furniture outright.
>Is it a bad idea to finance furniture at 0% interest if I can buy it in cash?
It’s not bad at all, assuming you completely pay off the loan before it becomes due. Otherwise, it won’t be 0%, and it will be a bad idea. Also, make sure to ask or the cash price. They should be identical.
Any time someone wants to lend me money for free (so that my money can continue to earn interest), I accept. I’ve done this with furniture in the past.
Me:
830/840/850 credit scores
Debt: mortgage; auto
Credit cards: 30
Credit-card debt: $0
My recommendation: Do as I did.
1. Definitely take the 0% loan.
2. Set up autopay FROM your bank to pay the loan off 60 days early. Do NOT use the loan account to send drafts TO your bank account.
3. Use your google/outlook calendar to set a reminder to review the account 60 days from final payment.
4. As others have said, only do this is there is no cash discount (at various times, I have selected either/or… and sometimes both; with superb credit, one can do some amazing things).
5. Get the furniture you really and truly want.
BTW, congratulations!
How much is the furniture?
Going to pull your credit if you finance it which will ding your credit right before closing. Big nope for me.
We just finished paying off a $5000 set of couches that we bought at 0% for 12 months – we just set aside the cash in a money market fund and made about $90 in interest during the 12 months.
It’s perfectly fine to do **so long as you have the discipline to actually pay off the stuff** within the 12 months and not spend the cash on something else.
Just came here to say that paying $3000+ for a bedroom set and $3000-4000 for a living room set is highway robbery. Don’t fall for the trap. Stay away from furniture retail stores and curate your own style instead.
Also, spring mattresses suck, do yourself a favor and buy the $300 foam mattress instead.
People in this thread missing the point of this promotion. This is done so OP spends 3k instead of 2.5k on furniture.
I mean if you want to mathematically optimize stuff sure 0% financing is free time value..
With that said they’re just hoping you don’t pay on time. Remember life gets lifey sometimes. If I was down on my luck I’d prefer to have the peace of mind that the couch is paid off.
Plus the amount of interest you’ll earn on a few thousand dollars is minimal anyways, what’s the point? To make a few bucks in a HYSA?
I wouldn’t gamble the couch money on high risk stock picks or anything
Yeah, don’t do anything with opening new lines of credit until after you’ve closed on that house.
I personally don’t have a problem with 0% interest financing **as long as you can budget the spending accordingly.**
I feel like a lot of people have a hard time seeing the bigger picture, so if somebody buys, say, $5000 worth of furniture as a single payment, they see that immediate hit to their bank account and realize that they’re now $5000 less wealthy.
If they finance that $5000 over say, two years and only pay about $209 a month, they see that smaller monthly hit on their bank account and think that they can afford a lot more things because their bank account only decreases by $209 every month.
My Bank of America / Merrill shows me my total net worth when all my liabilities (credit cards and loans) within their own ecosystem is subtracted, but when you’re financing through multiple other places, you may not immediately see your true net worth and that’s when a financial emergency in the future might sneak up on you.