A Better Way to Finance When You Have Bad Credit
Life happens. Unplanned medical expenses, loss of job, death, divorce. Whatever the circumstances, falling into the bad credit trap is a tough hole to climb out of as high interest rates and impossible terms perpetuates a vicious cycle.
While food and shelter are a top priority, you can’t exactly sleep on the floor. People need furniture. And furniture doesn’t last forever. Below are some estimated time frames recommended for replacing your worn out furniture.
- Sofas and love seats usually have a lifetime of 5-10 years
- Dining room furniture can last 5-15 years depending on the quality
- Loose or broken chairs should be replaced for safety reasons
Most furniture financing options available in big box stores are traditional financing options that disqualifies consumers with poor credit. Of course, there are alternative options that range from coercing a willing co-signer who has trust in you and rent to buy furniture agreements. By the time you pay off that rent to buy loan, you will have paid more than the furniture is worth. None of these financing options are ideal.
Below is a list of many traditional credit and loan options for those with good credit. If these options aren’t available to you, there are still options.
Traditional loans and credit:
- Unsecured loans don’t require any collateral. The better your credit rating, the lower your interest rate and the longer your pay back terms. With a lower credit score, you’ll pay a higher interest rate for a shorter period of time.
- Credit Unions are non-profit organizations that offer affordable rates on personal loans. Credit Unions prefer to work with people that have good or average credit scores and want to borrow $2,500 or less.
- Peer-to-peer lenders offer investor-funded loans to customers who have good credit. People who are accepted for this type of loan usually have credit scores of at least 600 or higher, have a lengthy credit history to review with an average income of $74,000 per year. Investors prefer to approve people with a low debt-to-income ratio. This option works the best for individuals with a high income and a good credit rating.
- Many companies will work with you if you have average credit: online lenders, banks, credit card companies, and other lenders are just a few to consider. Interest rates will be higher but you can still get a reasonable loan. Lenders take into account your job history and the potential for earnings in the future when approving or denying loan applications.
- If you have poor credit, you could consider asking a family member or friend to co-sign with you. Co-signing means that if you fail to make payments on the loan, your co-signer is responsible for the money you didn’t pay off. That situation requires a great deal of trust. Lenders prefer to have someone co-sign who has good credit.
- If co-signing isn’t an option, there are higher rate loans with short repayment terms of 12 months that could be an option. You can expect an interest rate of 30%-80% on this kind of a loan.
- Furniture financing is also available from rent-to-own centers who cater to people with poor or no credit by offering weekly rental rates over a period of several months. With rent to own contracts, you end up paying three to four times the cost of the furniture by the time it's paid off.
- Another option is a payday lending company. They usually charge 300% or more in interest on your financing. These loans are paid back each week on pay day and because of the high interest rate, consumers get trapped into a debt cycle that’s difficult to recover from.
Documentation You May Need To Get A Loan
- Employment information
- Current debt information (rent, mortgage, student loans, etc.)
- Photo identification
- Verification of your address with a utility bill or copy of your lease
- Mother's maiden name
- Previous addresses
- Proof of income like W-2 forms, bank statements, and pay stubs
- Date of birth
- Social Security Number
Source: Snapfinance .com
Snap Finance offered at A Better Home Store.
People with poor credit often think there are no other options except the above outlined. However, AbetterHomeStore.com offers customers with poor credit a different kind of financing option from SnapFinance.com. All that is required to start an application is, you have to be at least 18 years old, you have an income of at least $1,000 per month and you have an active checking account. You’re eligible to receive up to $3,000 depending on your job history and other factors.
It is wise to make a list of your outgoing expenses and compare it with your income to estimate how much you can afford per month on furniture financing. The rule of thumb is that you shouldn’t spend more than 50% of the value of your home on furniture.
Knowing there are options to help you live a better life is empowering. You can live a quality life once the weight of bad credit is lifted.
If you want more information about financing options with Snap Finance, click here.