There is a popular furniture chain whose recent TV commercials encouraged people to switch out purchases of items such as gourmet coffee drinks or manicures, and replace that monthly expense with one of their furniture deals. Anyone for a leather sofa? How about a new bedroom set? All for a $25 monthly payment. Sounds tempting!
They have a point. It is all about the choices we make with our money, but signing up for this type of financing locks you into years of monthly payments, and what about those months that you are short on cash? While you can skip the caffeine or do your own nails, failure to pay the $25 will result in a hit to your credit score, financial penalties, possible repossession or worse.
Many retailers and rental centers are offering these long term arrangements that are easy to sign up for, but difficult and expensive to get out of. By the time you do pay off the item according to the terms of the contract, the amount of interest charged can turn that $300 couch into a $600 one.
Recently, I worked with a family who had signed up for such a deal on a bedroom set. The contract with the retailer was “rent to own” with a $55 monthly payment. After a period of time, the family found they could no longer afford it, really did not like the set anyway, and wanted the retailer to take it back. Unfortunately, under the contract they were locked in; they could not return it. The choices were to either pay it off (at the inflated full retail price), or continue paying the payment for a couple more years, which would result in paying huge interest charges. Neither of these were good options!
In my opinion, it’s a good idea to avoid using rental centers and long term finance deals from retailers, but if you need furniture, what can you do?
Here are a few lower cost alternatives:
• Save for the items. Cash is always better and you get a better deal. Be sure to shop around and compare.
• Check out reputable used furniture and consignment stores.
• Look in thrift stores such as Goodwill, Salvation Army, or St. Vincent De Paul (St. Vincent De Paul also offers reasonable prices on new mattresses, and will deliver in some areas of the state. Call 603-627-1412 for more information).
• It’s yard sale season in New Hampshire; check for those in your area that have furniture.
• http://www.freecycle.org is a nonprofit site that is all about reuse and keeping good stuff out of landfills. It allows members to offer and request items. Membership is free.
With a little searching, creativity, and sometimes paint, you can often find attractive and affordable pieces that will fit with your home and budget, and best of all, with no contract!
To learn more about personal financial management, including credit and debt, visit http://www.findfinancialfreedom.org.