Unfortunately, we do not always have the money to buy something new when we need it. And in emergency situations many of turn to short term loans to solve our financial issues.
CashLady takes a look at how buying goods on finance can be a good option, especially for high-value purchases.
What does buying goods on finance actually mean?
When you are buying goods on finance you are essentially borrowing money to pay for the goods you want to buy.
For example, you may need a new sofa. You do not have the money that you need to pay for the sofa. However, you are sometimes able to get a loan today to buy that sofa.
Unlike a personal loan or a short term loan, the money that you borrow will not go into your bank account. You will never actually ‘see’ the money. The money will go straight to the shop you want to buy the goods from.
You will then pay back the loan, usually on a monthly basis.
What is POS finance?
POS finance is a finance option at ‘point of sale‘. A point of sale is the place where you buy your goods. In a shop, this is usually the checkout counter.
A point of sale is the place where you buy your goods. In a shop, this is usually the checkout counter.
POS finance is essentially a loan that is offered to you in the shop (or websites) when you are at the point of buying your goods. This loan is given to you so that you can buy your goods without using cash or credit cards.
This loan is given to you so that you can buy your goods without using cash or credit cards.
Will I need to put down a deposit?
Whether you need to pay a deposit comes down to the rules of the shop that is selling the goods to you. Some will need a deposit and some will not.
If you do pay a deposit towards the cost of the goods you are buying, this will be taken off the value of the finance that you are borrowing.
Most straightforward finance options, whether ‘interest-free’ or ‘interest bearing’, will require a deposit – usually minimum 10% of the purchase price.
‘Buy now pay later’ options will normally provide an option to finance without a deposit.
What is ‘buy now pay later’?
Buy now pay later is a common type of finance that people use to buy their goods. If you choose this type of finance you will not have to start paying for your goods for a set period of time.
This set period of time varies from retailer to retailer but many retailers say that you will not have to pay anything for around 6 to 12 months.
An example of a retailer who offers buy now pay later is Very. Very offer you the option to pay for your goods up to 12 months later if you spend over £200.
Many retailers allow you to pay off what you owe in chunks before the payment-free time ends. Or, in one single payment before the payment-free time ends.
In most cases, if you repay in full before this period ends then you should not have to pay any interest. However, if you do not repay in full before your payment-free period ends, you may have to pay interest on the money. This interest can sometimes be quite high.
To all intents and purposes, you are seen to be borrowing the money to buy your goods. This is because you have to pay it back at a later date.
Can I buy goods on finance interest free?
Many retailers give you an opportunity to buy your goods on finance interest free.
One example of a retailer who offers this is Laura Ashley.
An interest free purchase means you can spread the cost of goods over a long period of time without incurring any interest.
Interest free periods can range from 6 months to 4 years.
Furniture retailers such as DFS, SCS and Oak Furnitureland are some of the biggest providers of interest free finance and heavily promote this to encourage consumer spending.
Do the retailers themselves lend me the money?
The retailers usually work in partnership with banks who will lend you the money. For example, if you buy goods on finance from Laura Ashley you will be borrowing money from Barclays Partner Finance.
Others banks and finance companies supporting retail finance include Hitachi Capital & Close Brothers,
Can I choose how long it will take me to pay my loan back?
Many lenders offer you the option of choosing how long the term of your loan will be. Usually, this ranges from around 3 to 48 months.
Will I have to get a credit check?
Yes. When you buy goods on finance you will almost certainly need to undergo a credit check. This process is normally done electronically and should take just a few minutes. Lenders need to make sure your loan is affordable and need to know your credit history.
Are store cards a type of retail finance?
Store cards are a type of credit card. The main difference between a store card and a credit card is that with a store card you will only be able to use it to buy goods from the shop that the card is from.
Store cards can be a relatively expensive type of retail finance as their APR is normally between 20% to 30%. This means that if you do not pay them off in full you could be paying more interest than you would expect to pay on a credit card.
What is hire purchase?
Hire purchase is a type of finance where you are making payments to hire the goods. You are also given the option to buy the goods by paying an ‘option to purchase’ fee at the end of your agreement.
Some people use a hire purchase agreement as a way to finance a car.
What types of goods can I buy on finance?
Many retailers offer you the option to buy goods on finance.
You can buy everything from clothing to a sofa.
What are the advantages of buying goods on finance?
By buying goods on finance you can buy goods that you do not have the cash or credit cards for.
Buying goods on finance can be especially useful for big purchases. For example, imagine if your washing machine broke. Many people would not have the money available to buy a new one.
Retail finance can enable you to buy your washing machine even if you do not have a lump sum of money available.
However, it is important to never borrow more than you can pay back.
What are the disadvantages of buying goods on finance?
There are very few disadvantages when buying goods on finance, especially when purchasing interest free as there are no additional fees or interest to pay.
If you can comfortably manage the repayments and do not have access to the money needed to buy outright, it can be a very good option.
If you are using a ‘buy now pay later’ scheme, it is important to repay your loan in full, on time before the higher rate of interest kicks in and you are tied to a lengthier repayment period.
Is it better to get a short term loan?
If you are thinking of getting a short term loan there are many advantages to getting a short term loan online.
Furthermore, they include the fact that by going online to get your short term loan you can compare many different lenders. As a result, you are more likely to find the best deal for you.
Buying goods on finance can be a good way to spread the cost of your purchases.
Buying goods on finance can be especially useful for expensive purchases, like a television or a sofa.
This is because you do not need to pay a large sum of money upfront.
Many retailers offer you the option of buying goods on finance that does not need a deposit. Some retailers even offer interest free credit.
Buy now pay later is a type of retail finance. It enables you to ‘buy’ something and not pay for it until a later date. This can allow you to save up money for what you need at the same time as having the goods in your home.
Buy now pay later is often interest free, as long as you pay for what you have bought before the payment-free period ends.
If you do not pay before your payment-free period ends you could be charged interest. This interest can be high and can result in you paying more for your goods.
A short term loan is an alternative to retail finance. Unlike retail finance, a short term loan will go directly into your bank account.
You are also able to compare short term loans online to find the best loan for your circumstances.
Retail finance can enable you to buy goods even if you do not have a lump sum of money. It is important to never borrow more than you can afford to pay back.
Finally, you should make sure you read any finance agreement before signing it. This is so that you are sure of the payment terms such as when you will need to pay the money back.