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6 types of furniture financing

Want to upgrade your home decor but don't have the cash on hand? Here's how you can pay for it.

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Furnishing a new home or apartment can be one of the most expensive parts of moving – but even replacing your sofa or expanding your closet space can cost more than you have saved up. Fortunately, there are several different ways you can make the cost of updating your furnishings a little more affordable.

6 furniture financing options

There are several different ways to finance new furniture. Depending on what you’re buying and your personal financial situation, not all options might be right for you.

1. In-store furniture financing

Many furniture stores offer in-store financing.

How it works: The furniture store will partner with a lending company to finance your loan. Get a low or zero-interest rate for a set number of months based on approved credit.

Pros:

  • It’s easy to sign up for, and many furniture stores offer loans with a promotional introductory rate of 0% or low-interest annual percentage rate (APR) for the first 6 to 24 months. If you think you can pay off your loan before that period is up, this option could be a great deal for you.

What to watch out for:

  • Many of these deals come with a deferred interest clause. This means that if you’re unable to pay back the loan by the end of the promotional period, all of the interest you would have had to pay gets added to your loan. Since interest on these loans is typically around 20% to 30%, it can add up quickly.
  • A minimum purchase amount may apply.
  • You may be charged an admin fee.

2. Layaway

Layaway is another in-store furniture financing option for buying a piece of new furniture.

How it works: Place a deposit on the furniture you want and have the store set it aside for future pickup. Make small payments until you’ve paid off the entire balance. Once the furniture is paid for, you can pick it up from the store.

Pros:

  • Layaway purchases are interest-free.
  • Make payments as your budget allows.

What to watch out for:

  • You may be charged a service fee.
  • If you change your mind, most deals charge hefty cancellation fees.
  • You don’t get the furniture until you’ve paid it off in full.
  • If that type of furniture goes on sale while you’re paying it off, you won’t be able to take advantage of the deal.
  • Layaway may not be as widely available as other types of financing.

    3. Personal loans for furniture financing

    Personal loans are a popular option for people who don’t want to use in-store financing to buy furniture. You can get a personal loan from a bank, credit union or online lender. Online lenders have faster turnaround times and more flexible lending requirements. Banks and credit unions have more competitive interest rates.

    How it works: Apply for a specific amount and get an offer on your interest rate and loan term. To get the best deal on a personal loan, you will need to have good credit and a low debt-to-income ratio. If you have bad credit, you can still get a loan from lenders who specialize in bad credit loans, but expect to see higher interest rates.

    Pros:

    • Personal loans typically range from $500 to $50,000, though you can find lenders like banks and credit unions who offer as much as $100,000.
    • Interest rates tend to run from 6% to 47% and terms often span between 6 months and 5 years.
    • If you go with an online lender, you can get a personal loan within 1 to 3 business days.

    What to watch out for:

    • Some lenders charge an early repayment fee, which can add to the cost of your loan.
    • If your loan is secured (i.e. involves collateral), you’ll lose your asset if you default on your loan repayments.

    Compare personal loans for furniture financing

    Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
    LoanConnect Personal Loan
    Secured from 1.90%, Unsecured from 5.75%-46.96%
    $500 - $50,000
    3 - 120 months
    Currents debts must total less than 60% of income
    Min. credit score: 300
    Go to site
    More Info
    An online broker who helps inform clients towards better finances. Get pre-approved by different lenders for unsecured or secured loans in 5 minutes with any credit score.
    Spring Financial Personal Loan
    17.99% - 46.96%
    $500 - $15,000
    9 - 48 months
    Min. income of $1,800 /month, 3+ months employed
    Min. credit score: 400
    Go to site
    More Info
    An online lender offering unsecured personal loans and credit builder loans. Those filing for bankruptcy or a consumer proposal can also apply. If you're not eligible for an unsecured loan, you may be offered a loan to help rebuild your credit.
    FlexMoney Personal Loan
    18.90% - 46.93%
    $500 - $15,000
    6 - 60 months
    Min. income of $2,000 /month, 3+ months employed
    Min. credit score: 500
    Go to site
    More Info
    An online lender offering flexible unsecured loans. Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan at any time.
    SkyCap Financial Personal Loan
    12.99% - 39.99%
    $500 - $10,000
    9 - 36 months
    Min. income of $1,200 /month, stable employment
    Min. credit score: 550
    Go to site
    More Info
    An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
    Loans Canada Personal Loan
    Secured from 2.00%, Unsecured from 8.00% to 46.96%
    $300 - $50,000
    3 - 60 months
    No min. income or employment requirements
    Min. credit score: 300
    Go to site
    More Info
    An online broker with the largest lender network in Canada. Get matched for free with lenders offering both unsecured and secured loans through one quick application regardless of your financial situation.
    OFFER
    Mogo Personal Loan
    9.90% - 46.96%
    $200 - $35,000
    6 - 60 months
    Min. income of $13,000 /year
    Min. credit score: 500


    Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
    Go to site
    More Info
    An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
    Fairstone Personal Loan (Unsecured)
    26.99% - 39.99%
    $500 - $25,000
    6 - 60 months
    Able to make monthly repayments on your loan
    Min. credit score: 560
    Go to site
    More Info
    An online lender with a team dedicated to professional service. Get a quote for an unsecured loan without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
    Fairstone Personal Loan (Secured)
    19.99% - 23.99%
    $5,000 - $50,000
    60 - 120 months
    Must be a homeowner
    Min. credit score: 560
    Go to site
    More Info
    Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
    Loan Away Personal Loan
    19.90% - 45.90%
    $1,000 - $5,000
    6 - 36 months
    No min. income or employment requirements
    Min. credit score: 300
    Go to site
    More Info
    A lender that approves unsecured loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
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    If you borrowed $20,000 over a 5-year term at 9.50% APR (variable), you would make 60 monthly payments of $420.04 and pay $25,202.23 overall, which includes interest of $5,202.23. The overall cost for comparison is 9.50% APR representative.

    4. Home equity loans and home equity lines of credit (HELOCs)

    If you’re a homeowner, these loans are another option.

    How it works: Borrow against the amount of equity you own in your home. Since it’s secured with your home as collateral, lenders are likely to offer more favourable rates and terms than on an unsecured personal loan. A home equity loan gives you a fixed loan amount, while a HELOC gives you a credit limit, and you can borrow as much as you want up to that limit.

    Pros:

    • It could be a more affordable option for borrowers who don’t have great credit.
    • You can get a lower interest rate since you’re using your home as collateral.

    What to watch out for:

    • If you just bought a new home, it’s likely you haven’t built up enough equity to borrow from.
    • You run the risk of losing your home if you can’t pay back the loan on time since it’s used as collateral to secure the loan.

    Compare home equity loans and HELOCs for furniture financing

    Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
    Fairstone Personal Loan (Secured)
    19.99% - 23.99%
    $5,000 - $50,000
    60 - 120 months
    Must be a homeowner
    Min. credit score: 560
    Go to site
    More Info
    Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
    Alpine Credits Home Equity Loan
    10.00% - 22.99%
    $10,000 - $500,000
    Up to 60 months
    Must be a homeowner
    Min. credit score: 300
    Check eligibility
    More Info
    Alpine Credits offer home equity loans in amounts from $10,000 to $500,000. Must be a homeowner to qualify. Check eligibility for this loan through LoanConnect.
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    Name Product Interest Rate (APR) Min. credit score Provincial availability Other loans offered
    Tangerine Home Equity Line of Credit
    2.35%
    Prime -10
    620+
    All of Canada
    First mortgage, HELOC, Refinancing
    Withdraw funds from your HELOC, make payments and pay off your balance in full at any time.
    Breezeful Home Equity Line of Credit
    Varies
    600
    All of Canada
    First mortgage, Second mortgage, HELOC, Reverse mortgage, Rent to own
    Breezeful is a 100% online mortgage broker that connects borrowers to competitive rate offers from over 30+ banks and mortgage lenders.
    Homewise Home Equity Line of Credit
    Varies
    600
    Not available in Quebec
    First mortgage, Second mortgage, HELOC, Bridge mortgage
    Homewise's personal advisors can get you HELOC rates from over 30 banks and lenders.
    intelliMortgage Home Equity Line of Credit
    Varies
    680
    AB, BC, NL, ON, PE
    First mortgage, HELOC
    intelliMortgage is an online mortgage broker that works with over 100+ banks and mortgage lenders across Canada.
    Loans Canada Home Equity Line of Credit
    3.45% - 10.99%
    400
    All of Canada
    First mortgage, Second mortgage, HELOC, Refinancing, Bridge mortgage
    Loans Canada connects borrowers with a broker in their area. Bad credit, EI and CERB applicants are considered.
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    5. Credit cards

    Credit cards are useful when you’re making small purchases.

    How it works: Borrow up to a certain limit using your credit card. Pay no interest for a period of time.

    Pros:

    • Take advantage of the grace-free period, which is usually between 21 and 55 days.
    • For larger purchases, consider applying for a low interest rate credit card.
    • Earn rewards on your credit card.

    What to watch out for:

    • If you’re unable to pay off your balance in full each month, you will face interest charges and your credit score will take a hit.
    • Make sure to only spend up to 30% of your credit limit so you don’t affect your credit score.

    Compare credit cards for furniture financing

    Name Product Purchase Interest Rate Cash Advance Rate Annual Fee Minimum Income Reward
    HSBC +Rewards™ Mastercard®
    11.9%
    11.9%
    $0 annual fee for the first year ($25 thereafter)
    N/A
    Earn 2 Points for every $1 spent on eligible dining or entertainment purchases.
    Get 20,000 Points (up to $100 in value), plus get a 1st year annual fee waiver. Apply by October 3, 2021.
    BMO Preferred Rate Mastercard
    12.99%
    12.99%
    $20
    $15,000
    Take advantage of an introductory balance transfer offer, annual fee waiver in the first year, and low purchase and cash advance interest rates.
    Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
    Scotiabank Value Visa Card
    12.99%
    12.99%
    $29
    $12,000
    Save on interest for 6 months by consolidating your higher-rate balances with the balance transfer offer, and get an on-going 12.99% interest rate on purchases, cash advances and balance transfers.
    Get a 0.99% introductory interest rate on balance transfers with a 0% transfer fee for the first 6 months. Apply by November 21, 2021.
    BMO Rewards Business Mastercard
    14.99%
    22.99%
    $0 annual fee for the first year ($120 thereafter)
    N/A
    Earn 3 BMO Rewards points for every $1 you spend on gas, office supplies, cell phone bills and internet bills, and earn 1.5 BMO Rewards points for every $1 you spend elsewhere.
    Get 50,000 points and the $120 annual fee waived in the first year.
    Business Platinum Card from American Express
    N/A
    N/A
    $499
    N/A
    Earn 1.25 Membership Rewards points for every $1 spent on eligible purchases
    Earn a Welcome Bonus of 75,000 Membership Rewards points in your first three months of Cardmembership.
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    6. Rent-to-own stores

    How it works: Not sure you’re ready to commit to that new piece of furniture? Some stores allow you to rent furniture and return it at any time without charging a fee.

    Pros:

    • Typically there’s no credit check, and it could be ideal when you only need something for a limited time — like an extra bed for when your in-laws visit or a big TV for your annual Christmas party.

    What to watch out for:

    • You could end up paying for more than the item’s worth if you rent it long term — sometimes several times its value.
    • Some rent-to-own stores might also charge a balloon payment if you decide you want to own it when your rental period is up.

    How do you get furniture financing in Canada with bad credit?

    If you have bad credit and need furniture financing in Canada, personal loans from online lenders are an option. There are online lenders who specialize in bad credit personal loans, although you may face higher interest rates since the lenders are taking on more risk.

    Find out what interest rate you could get by filling out the lender’s application form in less than 10 minutes and getting personal loan pre-approval. Online lenders are fast and can usually give a pre-approval decision within minutes. Learn more about bad credit personal loans for furniture financing.

    Martha buys new furniture

    Martha has expensive taste and has decided to replace her master bedroom furniture. She wants a full set including a new king sized bed frame complete with mattress, two bedside tables, a dresser and a standing wardrobe. In total, the furniture set will cost $19,000.00. Her husband John wants to go on vacation, so they don’t want to use all of their savings on the bedroom set. Instead, they will use $9,000.00 in savings and take out a loan for the remaining $10,000.00. Since in-store financing is too expensive, they head online to compare lenders. They settle for a personal loan from their local bank and are approved for $10,000.00 at a competitive and low APR.
    Cost of furniture$19,000.00
    Loan typePersonal loan
    Loan amount$10,000.00
    Interest rate5.00%
    Loan term2 years
    Additional feesOrigination fee of 3.00% ($300.00)
    Monthly payment$438.71
    Total loan cost$10,729.13

    *The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.

    The drawbacks of in-store financing

    Getting a loan with a 0% promotional period might seem like a logical choice, but there are some major drawbacks to keep in mind.

    • Missed payments
      If you miss a payment on your in-store furniture loan, the deferred interest clause could kick in early. Paying high interest on a loan that you’re already struggling to pay off could send you into a cycle of debt.
    • Consumer finance loans
      Some in-store financing deals don’t require a credit check. If you have a term loan, it shows up on your credit report as a consumer finance loan, which is a type of credit designed for poor-credit borrowers. Lenders who see this on your credit report might not be as willing to offer you a good deal on a loan in the future.
    • Revolving accounts
      Some furniture stores might report your loan as a revolving account. With a revolving account, you have access to a certain amount of funds — or credit limit. When you buy furniture on a revolving account, typically you use your entire credit limit. This can hurt your credit score by damaging your credit utilization ratio. The less you use of your credit limit, the more favourably it’ll reflect on your credit score.

    How much does new furniture cost?

    The cost of new furniture depends on the type and quality you’re looking for. While you can get a dining room set for as little as $100 at Ikea and similar stores, you can easily spend 20 times that amount at a high-end retailer. Below we show common prices for various furniture from Wayfair Canada.

    6 tips for saving on furniture

    1. Buy direct from the manufacturer. Wholesale prices from the manufacturer are often less than retail prices you find at the store or online.
    2. Go to warehouse sales. It’s common for furniture stores to open their warehouses to push out overstocked items, sell floor samples, returned or damaged furniture — often at a big discount.
    3. Shop secondhand. Not only are secondhand items less expensive than new furniture, a well-made used item often lasts longer than its cheaply made counterpart.
    4. Shop at the end of the month. Salespeople often have a monthly quota to meet and are sometimes more willing to budge on the price if they’re short on sales.
    5. Wait until January or July. New showroom styles usually come out in February and August, meaning that salespeople might be pushing to get rid of older styles the month before.
    6. Sign up for sales alerts. If you don’t need furniture now, signing up for sales alerts could help you find a deal you might have otherwise missed.

    Bottom line

    In-store financing is easier than taking out a personal loan and could be a good deal if you’re able to make repayments on time and before the financing period is up. However, personal loans come with less risk and could end saving you money if you have good or excellent credit. Compare personal loans.

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