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Other than your home and your car, furniture is one of the biggest purchases you’re ever likely to make.

However, managing such a big expense isn’t always straightforward, particularly as it tends to come just after moving into a new home, when finances are already stretched.

Much like home improvement loans, furniture loans are designed to make it easier to spread a major cost over a longer period, helping you to manage your finances and make a significant purchase without wiping out your savings.

In this article, we’ll look at how furniture loans work, explain how you can get the best out of them, and provide an overview of the alternatives.

If you’re looking for a flexible home improvement loan of £1,500-12,000 to buy furniture, you can skip this article and take a look at our loan calculator at www.koyoloans.com (representative APR 27%). 

If you want to know more about furniture loans and the alternatives though, read on!

What is a furniture loan?

A furniture loan is simply a personal loan that you use to buy furniture.

When you apply for a personal loan, the loan provider will ask you what you plan to do with it. Common reasons for a personal loan include buying a new or used car, consolidating debts or, in this case, purchasing furniture.

It’s worth noting that while a furniture loan might sound similar to a home improvement loan, they’re actually different things. A furniture loan (as the name suggests) should be used to buy furniture. On the other hand, a home improvement loan can be used for lasting improvements to your house or apartment, such as new windows, an extension, or upgrading your kitchen, as well as furniture. 

For more on this topic, take a look at our full guides: how to pay for home improvements, and how to get a home improvement loan with bad credit.

Secured vs. unsecured

Furniture loans are generally unsecured. This is in contrast to secured loans - mortgages are the best-known example - where failure to meet your monthly repayments could lead to your house being repossessed. This makes furniture loans safer for borrowers than other, secured forms of credit.

How do furniture loans work?

Furniture loans work just like any other personal loan, meaning that they’re simple, clear, and transparent. The application process is relatively quick, and some providers will give you a decision within 24 hours of you filling out an online application form.

You borrow a fixed amount of money, which you generally receive in your bank account as a lump sum. You then use that money to purchase your furniture and make monthly repayments over an agreed period, repaying the total amount plus interest. The rate of interest is set in advance, so you know precisely what you’ll have to repay, and when.

A graphic showing a maginfying class, a sofa and a pound sign, symbolizing three steps to look at for furniture financing

When is taking out a loan for furniture a good idea?

When making a purchase, your default option should generally be to use savings. However, not all of us are fortunate enough to have enough saved up to cover the cost of furniture.

That’s where furniture loans come in. Furniture loans - and unsecured loans in general - are designed to spread the cost of a purchase over a more manageable repayment period. They are not a way to live beyond your means - they shouldn’t be used as a way to buy expensive things that you couldn’t ordinarily afford. Rather, they are a way to bring forward an important purchase and spread the cost, helping you to manage your finances.

Whenever you take out any personal loan to fund a purchase, you should ask yourself a few questions:

  1. Do I really need to make this purchase?

  2. Is it a purchase that I need to make now?

  3. Can I comfortably afford the repayments?

If you answer no to any of these questions, it’s likely that a personal loan is an unsuitable option.

However, if you answer yes to all three, a personal loan is worth considering, alongside other financing options.

What types of furniture can you buy with a home improvement loan?

You can use a home improvement loan to fund any and all types of furniture. That could include:

  • Sofas, settees, and armchairs

  • Tables and chairs

  • Beds

  • Outdoor furniture

  • Designer furniture

  • Shelving and bookcases

That’s one of the advantages of personal loans - you receive the cash as a lump sum, and as long as you stick to the terms of the loan, you can spend it however you like. You’re not tied to a particular furniture retailer, giving you lots of flexibility.

What other ways are there to finance furniture?

There are many other ways to pay for furniture. In this section, we’ll run through some of the most popular options, giving pros and cons for each.

Cash savings

Whenever possible, you should make purchases using your savings, rather than taking on debt. That’s because most forms of credit involve interest or a fee, and you’ll have to make monthly payments over a long period - which leaves you exposed if your circumstances change.

So if you have money saved up, it’s best to use that. One notable exception occurs when making a purchase would wipe out your cash savings - it’s best to keep some money aside for a rainy day, so if that’s not possible, you should also consider other funding options.

Credit card or store card

Using a credit card or store card is another popular way to fund a furniture purchase. Unlike with a personal loan, there are no fixed repayments, so you make repayments on your own terms.

Often, credit cards come with a 0% introductory period too, so they can be cost-effective.

However, unlike a personal loan or the overdraft that comes with your current account or debit card, the interest rate payable tends to shoot up after this period. Without the discipline that comes with a fixed monthly payment, it can be tempting to roll over the balance again and again. Doing this means you’ll have to repay a lot of interest, which is a major drawback.

Store credit

Many mainstream furniture stores offer store credit, which can be a very competitive way to fund a purchase. The furniture retailer provides credit, which you repay in instalments.

That’s because rates are often low (since the provider is already making a profit on the furniture sale), and may even be zero.

If that’s the case, this can be a good option - one drawback is that you’re tied to a particular store (e.g. if Ikea are offering store credit but you like a sofa in Habitat, you’re out of luck). 

Budgeting loan

A budgeting loan is available only to people receiving benefits from the government and is designed to help people in difficult financial situations to make significant, necessary purchases. Depending on your circumstances, you can borrow up to £812, which you repay without interest. Repayments are taken directly from your benefits.

A budgeting loan is only suitable for people receiving benefits, but if you’re in this category, you meet the other criteria, and the purchase you want to make is relatively inexpensive, it is certainly worth considering.

For more information on these options, we’ve got a more detailed guide: how to finance furniture for a new home.

Next steps

Now that we’ve explained furniture loans, and how they compare to other options, hopefully, you have a good idea of what might work best for you. To help, we’ve set out the pros and cons of each one below:

Option

Good for

Pros

Cons

Savings

People with enough savings to cover a major purchase - and still have some left over for a rainy day

No interest or fees to pay; no monthly repayments to worry about

None

Personal loan

People who want a simple, straightforward way to borrow

Fixed payments, easy to manage, competitive interest rates

Very little flexibility, interest can still be higher than certain credit cards and store credit

Credit card

People who have the self-discipline to pay off the balance quickly

May offer an interest-free period, repay balance at your own pace

Interest rate is high after introductory period; it’s tempting roll over the balance and keep paying interest

Store credit

People who are happy to be flexible about where they buy their furniture from

Interest is competitive, and may even be interest-free

You’re tied to a specific provider; not available everywhere

Budgeting loan

People receiving government benefits

No interest repayable

Low maximum loan size; not available to most people

If you’re looking for a flexible home improvement loan of £1,500-12,000 to buy furniture, you can take a look at our loan calculator or make an application at www.koyoloans.com (representative APR 27%).

Below, we’ve answered some of the questions that we come across most frequently, but if there’s anything else you’d like to know, let us know in the comments section!

Frequently asked questions about furniture loans

Should I get a loan for furniture?

In most cases, it’s best to pay for furniture using savings. If that’s not possible, a furniture loan can be a good idea, but you should make sure you can comfortably afford the repayments - and consider what would happen if your circumstances were to change.

You can also consider other ways to pay for furniture, such as using a credit card or store credit - we’ve summarised those above.

How much can you borrow to pay for furniture?

To fund furniture, you should only really consider an unsecured personal loan (no sofa is worth putting your home at risk for). The amount you’re able to borrow will depend on your credit history, but for UK residents, most lenders offer loan amounts starting at £1,000 and topping out at around £25,000.

Does taking out a loan to pay for furniture hurt your credit score?

Yes - taking out any new form of credit will have an impact on your credit score, at least in the short term. However, the only use for a good credit score is to allow you to take out appropriate financing at a competitive rate, so it’s a bit like asking if going shopping will affect your bank balance.

Your score will recover pretty quickly though, so long as you make monthly payments - and when you repay the balance in full, your score should be in better shape than before you took the loan out in the first place.

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