The fridge isn’t holding temperature. The dryer leaves clothes soaked from the wash cycle. Or maybe you’re just looking to treat yourself to a shiny new dishwasher. In cases like these, you might be in the market for a new appliance – but the price isn’t quite right for your budget. Luckily, financing an appliance could help you buy the new appliances you need when you need them.
But just what is appliance financing, what does it involve, and when is it the right choice? We’ve got all the answers, so let’s get started!
What is appliance financing?
When you buy a house, car, or other expensive item, you probably finance it through a loan. You make an initial payment, then agree to pay the remainder of the purchase’s amount over time through monthly installments. Appliance financing is the exact same thing, whether it’s for financing kitchen appliances or more general home appliances.
Imagine that you’re beyond tired of your dishwasher sputtering and leaking in the middle of the night, all without rinsing your dishes properly. You decide to get a new state-of-the-art dishwasher with all the bells and whistles, like a fancy LED screen, programmable timers, and extra-specific wash cycles.
The only sticking point is the price. It's a little more expensive than what you budgeted for when you started shopping. Through appliance financing, you can buy that top-of-the-line dishwasher now instead of having to save up for another few months. Financing this and other kitchen appliances in this manner could be a great option in the long run.
You speak to the store, pay half of the price of the dishwasher up front, then agree to pay the remainder of the cost over six months with a reasonable interest rate. So long as you’re confident you can make those payments on time, everyone wins!
What kinds of appliances can you finance?
Appliance financing is available for practically any home appliance you can imagine, ranging from refrigerators and microwaves to dishwashers, grills, and more. In fact, retail outlets that sell appliances and pricey electronics, like televisions and stereo systems, offer more financing options than ever.
When you’re browsing different appliances for your needs, look at the price tag. Most financeable home appliances will have a special sticker or statement on their price tags saying something like, "Speak to a sales specialist for financing options," or have their financing offers listed right there.
Types of appliance financing
Appliance financing is very common – so common that stores may offer more than one type of financing agreement. For example, you might find:
- Traditional store financing – say, buy a new grill over 18 months with 0% interest.
- Personal loan financing – you take out an appliance loan, use the money to pay for your appliance, and then pay off the loan (with an agreed-upon interest rate) over several months.
- Buy now, pay later (BNPL) – with this model, you can split the purchase of an appliance into a certain number of payments. Sometimes called point-of-sale loans, BNPL offers may not include interest or even require credit checks, so they might be good means to pay for an appliance with bad credit.
- Credit card financing – you pay for an appliance with a line of credit, then pay off that line of credit each month. The balance accumulates interest every month until it's all paid off.
With so many different types of appliance financing available, there's almost certainly something that fits with your budget, credit score, and other financing needs.
Why finance appliances at all?
If you find an excellent refrigerator that's perfect for your kitchen on sale for $2,000, but you've only saved up $1,500, appliance financing lets you buy that refrigerator right now instead of having to wait until next month or after the sale ends. Depending on the type of financing you choose there may not be any downsides or strings attached, like high interest rates or fees.
There’s another benefit to financing appliance purchases: credit building. If you're trying to build up your credit through responsible borrowing and debt repayments, appliance financing is a relatively low-risk, accessible means to do just that.
Since appliance financing or loan offers usually aren't more than several hundred or a few thousand dollars, they’re excellent ways to show the credit bureaus you can borrow responsibly and pay your debts on time.
When is it smarter to buy an appliance outright?
Appliance financing is the right choice some of the time, but not all the time. There are some situations when financing an appliance purchase may not be in the best interest of your wallet, like:
- The only appliance financing offers available to you come with sky-high interest rates. If you can buy a new dishwasher, but you need to pay it off over 10 months at an APR that is higher than you would like, you may be better off saving for a month or two and buying the outright in cash.
- You aren’t sure you can afford to make the monthly payments for a new appliance. Just like you should never take out a loan you can't afford month to month, you should never finance an appliance you can't afford, either.
- Your credit score is already low and there's a lot of debt in your name. If you have a high debt-to-income ratio, or if you already have several loans and credit cards taken out, taking out even more debt could potentially weigh down your credit score and complicate your financial situation.
Like with all big financial decisions, you should weigh the pros and cons of every financing opportunity carefully before choosing.
How to finance an appliance with a loan
Good news – getting a loan to buy an appliance is straightforward and follows the same process as getting any other personal loan:
- You can shop around for different lenders, banks, and credit unions to find the right personal loan with the best interest rate and term.
- Next, you can apply for the loan by submitting proof of your income and other required documents. Many lenders allow you to prequalify for certain loan offers without risking a hit to your credit score.
- The lender will decide whether to offer you a loan based on your financial information.
- If the offer presented has terms favorable to you, you can sign the loan documents and receive your money. Then you can buy the appliance you want and start using it immediately!
Overall, appliance financing can be a reasonable way to buy new appliances when you need them, especially if the need to replace the appliance comes up unexpectedly. Use appliance financing wisely, and it's just one more way you can build credit and enjoy financial flexibility with the right lending partner.
The information and materials provided on this website are intended for informational purposes only and should not be treated as an offer or solicitation of credit or any other product or service of Regional Finance or any other company. This website may contain links to websites controlled or offered by third parties. The inclusion of any third-party link does not imply any endorsement by Regional Finance of the linked third party, its website, or its product or services.
Sources:
https://www.forbes.com/advisor/personal-loans/best-appliance-financing-loans/
