Appliance Financing: What You Need to Know
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As a homeowner, you’ll occasionally have to repair or replace appliances. Because home appliances like water heaters and refrigerators can be expensive, you may need to finance them.
Fortunately, you have a few different appliance financing options like personal loans and in-house financing. Comparing your options can help you find the financing solution that’s right for you.
In this post:
What is appliance financing?
Appliance financing is a way to borrow money to pay for a household appliance, like a stove or dishwasher. It often involves taking out a personal loan to borrow a lump sum of money or drawing against a line of credit. With a loan, you then repay the loan in monthly installments with interest over a set period.
This type of financing may be helpful if you need more funds to cover an appliance in full, but keep in mind that interest will make your loan more expensive.
If you’re looking for a personal loan to finance an appliance, visit Credible to compare rates from top lenders in minutes.
What kinds of appliances can you finance?
You can use appliance financing for any home appliance. Common examples include:
- Dishwashers
- Ovens
- Refrigerators
- Washing machines
- Dryers
- Air conditioners
- Heaters
- Water heaters
- Freezers
How to get appliance financing
You have several appliance financing options to choose from. The right one will depend on your unique financial situation and needs.
Here are some appliance financing options to consider:
Personal loan
A personal loan is a loan you borrow from a bank, credit union, or online lender that you can use to cover almost any expense, including household appliances. You receive the funds as a lump sum, and you repay the loan over a set period in fixed monthly installments, including interest.
When you apply for a personal loan, a lender considers many factors to determine if you qualify, like your credit score, debt-to-income ratio, and overall income. A credit score of 670 or higher will get you the best rates. Personal loans are usually unsecured, which means a lender doesn’t require you to put up collateral, like a savings account or car title.
You may be able to borrow up to $100,000, depending on the lender, with repayment terms as long as seven years. You’ll generally receive your funds within five days, though some lenders offer same-day funding. In addition, personal loan rates are typically lower than credit card rates, so this option could potentially help you save money.
Credit card
A credit card is a line of credit you can borrow from as needed — up to your credit limit — to cover nearly any expense.
Paying for your new appliance with a credit card may be your first thought, but remember that credit cards typically have high annual percentage rates (APRs) if you don’t pay your credit card bill in full and on time.
However, you may be able to get a credit card with a 0% APR introductory period for up to 18 months. If you can repay what you owe for the appliance within that period, you won’t have to pay any interest. Just keep in mind that after the introductory period ends, the credit card will change to its normal APR, which could be higher than that on your current credit card.
In-house financing
Several retailers offer in-house financing, often in the form of a store credit card. You can only use this type of credit card to purchase products from that store. However, some of these cards come with 0% APR promotional periods or other sign-up bonuses. After the promotional period ends, you’ll be responsible for paying the card’s normal rate if you don’t make full payments on time.
Rent to own
Some retail stores offer a rent-to-own or leasing option. With this arrangement, you take the appliance home and make weekly, biweekly, bimonthly, or monthly payments. After making payments over a certain amount of time — like 12 to 24 months — you’ll own the appliance.
While there’s no credit check when you apply for rent-to-own financing, you generally have to provide personal information such as your Social Security number, income, and references.
Before you consider this option, make sure you understand the rental terms. Depending on the terms of the leasing agreement, you could pay a lot more than the appliance is worth, thanks to fees and other costs. And if you stop making payments, the retailer will require you to return the appliance.
What to consider before financing appliances
Before financing appliances, it’s a good idea to consider the following factors to see if it’s the right fit for your unique situation:
- APR: The APR gives you an idea of how much your total borrowing costs will be. It’s a better way to measure your borrowing costs than just looking at the interest rate, since it accounts for interest and any fees a lender charges. Many online lenders allow you to prequalify online to get an estimate of the APR you’d receive.
- Repayment term: Your repayment term is how long you have to repay the loan. Choosing a longer loan term can lower your monthly payments, but you’ll pay more interest over the life of the loan. On the other hand, choosing a shorter loan term can help you save money in interest, but you’ll have higher monthly payments.
- Minimum loan or purchase amount: Personal loan lenders have minimum and maximum loan amounts. When comparing lenders, find out if the minimum loan amount is enough for you to finance your purchase. Similarly, in-house financing like credit cards may have a minimum purchase amount. If your appliance won’t meet the minimum amount, you may not be able to use that option.
- Credit requirements: Before you apply for a loan, review your credit score to get an idea of where you stand. Doing so can help determine whether you meet a lender’s credit requirements. You’ll have a better chance of qualifying for a personal loan with a low interest rate when you have a credit score of 670 or higher. In-house financing options may require you to get a credit check before approval.
- Fees: Some lenders and card issuers may charge fees. These could include origination fees for processing the loan, late fees, and prepayment penalties. If possible, try to find a loan or other form of financing with few or no fees.
To find the best deal for your situation, consider multiple options and compare rates, terms, and fees. You can use Credible to compare rates on personal loans from top lenders in minutes.
Appliance financing with bad credit
Although getting appliance financing with bad credit could be challenging, it’s possible. Some lenders have minimum credit score requirements as low as 550. And you may be able to get a credit card through in-house financing with a score of 580 or higher.
But if you get approved for financing with bad credit, note that a lender will likely charge you a higher interest rate, which will increase your cost of borrowing. If you don’t need to purchase an appliance immediately, taking steps to improve your credit before applying could help you secure a lower rate. You can improve your credit by catching up on any past-due bills and making on-time payments going forward.
Will financing an appliance hurt my credit?
Financing an appliance can have a positive or negative affect on your credit. When you apply for a loan or line of credit, a lender generally performs a hard credit inquiry to assess your credit history. As a result, your credit score might temporarily drop by up to five points.
If you repay the loan on time, it can add positive credit history to your credit reports, which can help you improve your credit score. But if you make late payments or default on the loan, it can damage your credit.
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