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What you need to know about in-store financing

Thinking about in-store financing? Know what you're getting yourself into before you head home with your purchases.

In-store financing options are designed to give you the flexibility to buy what you want, when you want, without paying upfront. This type of financing is usually offered directly through the store or company where you’re making a purchase.

Unlike credit cards that feature 0% interest for a promotional period or interest-free days when you meet payment requirements, these in-store financing agreements are offered by specific stores and can be available for longer periods of time. You will usually be billed periodically for your purchase. As a rule of thumb, newer items usually incur less interest and are therefore cheaper to finance, while older items likely incur higher interest payments.

In our guide, we show you how to compare in-store financing options to help you decide if it’s the right type of financing for you.

Which types of stores offer in-store financing?

There are a variety of different stores across Canada that offer in-store financing including:

  • Electronics outlets
  • Furniture stores
  • Hardware stores
  • Wholesale retailers
  • Retail stores
  • Music shops

Where do stores get the money to offer financing to customers?

There are 2 ways for businesses to provide customers with financing. The first is to provide funds and manage the entire process in-house. This involves taking on the entire responsibility of evaluating applications, disbursing loans, settling customers’ bills and collecting repayment. Businesses offering in-house financing solutions suffer the loss if customers default on their loans.

The second way to provide financing is to outsource the entire process to a third-party company such as Viabill or Financeit. In this scenario, the third-party company receives customers’ applications from the merchant, provides a quick funding decision and (if approval is granted) pays the merchant the full cost of the customers’ bill. Customers repay the third party financing company, which assumes the risk for the loan so the merchant doesn’t have to.

Many businesses choose to offer financing through third party companies, because it’s easier and less risky. However, in return, merchants may have to pay financing companies a flat, monthly fee or a small percentage of each bill (often 1-5%). In some cases, third party lenders may process customer financing using merchants’ existing point-of-sale systems of e-commerce platforms, charging no more than what merchants would normally pay to process customers’ transactions by debit or credit.

How to compare in-store financing options

Since many competing retailers, like furniture stores for example, will offer in-store financing options, it’s advisable to compare them. Consider the following when looking into your choices for in-store financing.

  • Competing retailers

If you’re considering purchasing something using in-store financing, it’s important to look at the range of retailers offering the same product with in-store financing options. This will allow you to choose the most cost-effective, flexible and convenient arrangement for you.

  • Interest-free terms

The interest-free options available on in-store financing will vary depending on what you buy and where you buy it. Some retailers may offer “buy now, pay later” deals, others may offer a specific number of months interest-free when you make purchases over a certain amount, and a few stores only have in-store finance deals at specific times, such as Christmas or end of summer sales.

  • Additional costs

Keep in mind that you will incur additional fees if you don’t make your repayments on time. Much like a credit card, you will face late fees if the store doesn’t receive its payment on the specified due dates.

  • In-store finance requirements

It’s also worth noting that most stores offering in-store financing will require some additional details from you at the time of the transaction. You usually have to provide identification information, such as:

  • Your name, address and contact information
  • A copy of your driver’s licence or government-issued ID
  • Your payment method, which is usually a credit card

In-store financing can be a great way to buy what you want now and still enjoy some cash flow flexibility. While you may be offered interest-free periods of repayment, you may also be stuck with strict conditions or limited-time offers. Weigh the features of any financing offer before signing on the dotted line to get your purchase.

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