We take our household appliances for granted. Ovens, refrigerators, dishwashers, washers, and dryers — they’re all essential for everyday life, but we just always expect them to work. When one finally breaks down and we realize it’s time to buy a new, expensive replacement, it can be a bitter pill to swallow.
But what if you don’t have the cash on hand to pay for a new appliance? That’s where appliance financing, also called an appliance loan, comes in.
What Is Appliance Financing?
Appliance financing refers to buying a new appliance on credit. Rather than paying out of pocket for a new appliance, you’ll pay it off over time in monthly increments, like a house or car payment.
While this means you don’t have to spend money from your emergency fund or borrow money from a relative to pay for a replacement fridge or washer, it does mean you might face additional fees, like interest.
You can get appliance financing in a number of ways, including taking out a personal loan, paying for the appliance with your credit card, and exploring in-store financing, such as in-store appliance loans or rent-to-own options.
How Does Appliance Financing Work?
When you can’t afford a new appliance but need one because your old one has broken down and is beyond repair (or not worth the cost of repair), you can take out an appliance loan. How this type of financing works depends on the method of financing you use.
For example, if you pay for the appliance with a credit card, you’ll simply make your credit card payments as you would for any other purchase. But if you take out a personal loan from a bank or credit union, you’ll have a set number of years to pay off the loan, and there may be certain fees on top of the interest charged.
Methods of Appliance Financing
There are a few key ways of paying for an expensive appliance you can’t afford.
Personal Appliance Loans
You can take out a personal loan from a financial institution for almost anything, including home renovations, a wedding or vacation, debt consolidation, and, yes, even a new appliance.
Credit score requirements for a personal loan vary depending on the lender. Often, borrowers with bad credit can still qualify for personal loans, but interest rates and fees may be higher.
Additionally, lenders might have origination and prepayment fees, so it’s a good idea to read a lender’s loan details thoroughly before signing on the dotted line.
Personal loan terms generally range from two to seven years. Monthly payments will be higher on a shorter loan, but interest rates are typically lower — meaning you’ll spend less on interest over the life of the loan.
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If you have a credit card with a high enough limit, you can also pay for an appliance with your card. Just keep in mind your credit card’s APR, or annual percentage rate — if you can’t pay off the balance in full by the due date, you may rack up interest charges quickly.
If you have a cash back or travel credit card, you could earn significant rewards by paying for an appliance on credit. For instance, refrigerators cost anywhere from $430 to $10,600. A 3% cash-back rewards card would earn you $318 on the purchase of a $10,600 fridge.
Many retailers offer their own financing options for large appliances, often via a store credit card. Unlike other credit cards, these cards are closed-loop, meaning you can only use them at that store.
These stores, like Lowe’s and Home Depot, may offer special perks for financing with them. This could include no interest if you pay in full within a set number of months or a percentage discount off the purchase price.
Some retailers may also offer rent-to-own options. In this scenario, you’d make a weekly or monthly payment until you’ve paid off the appliance. If you miss a payment, the store will take the appliance back. Rent-to-own fees can be high, making it more expensive for consumers by the time the appliance is paid off.
What Can Appliance Financing Be Used For?
You can use appliance financing for any kind of home appliance, but it’s generally not a good idea to take out a loan for luxury appliances like espresso makers and immersion blenders. Instead, experts advise only taking on loans for appliances that are considered more of a necessity, like:
• Ovens and stovetops
• Kitchen sinks
• Washing machines
Pros and Cons of Appliance Financing
Thinking about using appliance financing for your next household purchase? Let’s weigh the pros and cons:
|Appliance Financing Pros||Appliance Financing Cons|
|Ability to get an appliance even if you don’t have the funds readily available||May spend more than the sticker price with interest and fees|
|Makes it easier to do a complete home renovation||May face strict credit score requirements|
|May earn rewards, discounts, or special offers||Temptation to spend outside your means|
Appliance financing offers the following upsides:
• No waiting: When your washer or oven breaks down, you need a replacement. Sure, you can go to the laundromat and rely on microwave dinners temporarily, but ultimately, you’ll need to purchase a new appliance. If you don’t have the money in your bank account or are saving for other goals, you can instead take out an appliance loan or pay with your credit card to ensure you get the appliance you need without having to wait.
• Home renovation: If you’re doing a larger home renovation, like remodeling your kitchen, you may be purchasing all-new appliances. Those costs can add up quickly. By using a personal loan for appliances — or even a home renovation loan for the entire project — you can get everything you need, rather than replacing appliances one at a time.
• Rewards: If you finance your appliance with a rewards credit card, you may earn cash back or miles on your purchase. Or, if you use in-house financing from the store, you may qualify for special terms or even a discount.
Meanwhile, consider these downsides of appliance financing as well:
• Higher cost: When you take out a loan for home appliances, you’ll likely pay more for the appliance through interest and fees. Even if you put it on a credit card, you could incur fees if you don’t pay off the balance in full by your next statement due date.
• Credit score requirements: While bad-credit borrowers can typically get a personal loan, some consumers with low credit scores may have trouble qualifying for in-house financing or credit cards without high fees.
• Temptation to spend beyond means: Making a low monthly payment instead of paying the full price upfront can create the illusion of affordability. That means you might be tempted to buy an expensive appliance that’s actually outside your budget — after all, the monthly payment looks manageable. Just remember that you’ll have to make that monthly payment for several years.
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Appliance financing makes it possible to purchase a new appliance when your old one breaks down and you don’t have the cash on hand. Whether you need a new refrigerator, washer and dryer, oven, or dishwasher, an appliance personal loan, in-store financing, or credit card might be the way to go.
Thinking about funding your new appliance with a personal loan from SoFi? You’ll enjoy competitive SoFi personal loan interest rates, same-day funding, and even unemployment protection (we’ll modify your payments if you lose your job!). Check out your personal loan rate in just 60 seconds.
Which appliances can be financed?
You can finance virtually any appliance if you qualify for a personal loan or pay with a credit card. Retailers that offer in-house financing may only offer their programs for specific appliances, however. Before financing, just keep in mind that it’s not a good idea to finance luxury appliances that you don’t need or can’t afford. Instead, most experts advise using appliance financing for necessary appliances priced within your means, such as a refrigerator or washing machine.
What is the credit requirement for an appliance loan?
Credit requirements for appliance loans vary depending on the type of loan. Borrowers with bad credit typically can find personal loans for appliances, though these will come with high interest and fees. Rent-to-own programs don’t have a credit check. But if you want to take advantage of a retailer’s in-house financing, you may need a credit score of 580 or higher, though requirements vary by store.
Photo credit: iStock/Talaj
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