When you're out shopping, look at the overall price before you sit down and test out its comfortability. To avoid this error, set yourself a strict budget before you start shopping and stick to it. That monthly price looks a lot smaller and manageable, so you might be tempted to commit to paying it off for longer and paying more overall. When you’re getting a feel for a sofa and you see the price, some retailers show the full price as well as the monthly payment price options if you were to get 0% finance. Temptation to go over your budgetĠ% finance is a good option for some, but remember it’s also a clever marketing ploy. You can check yourself online using Experian or Clear Score. To maximise your chances of getting the best rates for the longest time, always check your credit history beforehand. What’s more, lots of applications for credit or approved credit agreements can have a negative impact on your credit record, so be aware of that.' Laura Suter from AJ Bell explains: 'You’re not promised the headline interest rate on offer from finance or credit card companies, and those with poor credit ratings will usually be given higher interest rates or shorter interest-free periods, or may be declined altogether. Betting on getting the headline 0% periodĪnother common mistake is reading the retailer's 0% finance for 24 months offer, for example, and thinking you will be offered the full 24 months. (Image credit: Future PLC / Lizzie Orme) 3. When considering 0% finance, also read the small print at each retailer as some state that if you miss a payment, your 0% rate could get dissolved so you will end up paying an extortionate rate on your purchase. You can avoid missing a payment by setting up a direct debit so you don’t have to remind yourself each month. Keeping on top of your repayments can have a positive affect on your credit score, showing you are a reliable person to lend to and you could find you are offered better rates in the future. To avoid this mistake, only opt for 0% finance if you know you can afford the monthly payments required by the retailer. Depending on the retailer, you could also risk your sofa being taken back if you don't keep up with your payments. Retailers that offer 0% finance will check your credit score to to ensure you can afford the monthly repayments.įuthermore, should you miss any repayments or pay late, this will also affect your credit score and could impact future credit or mortgage applications. Just because you’re not whacking the cost of your sofa on a credit card, it doesn’t mean your credit score doesn't need to be factored in. Assuming your credit score isn’t involved Remember, the longer your loan term, the lower your monthly repayments, but the more interest you will pay overall. Personal loans tend to be for one to five years, with some lenders offering up to 10 years. You will have to pay interest going this route, but the better your credit score, generally speaking, you could be offered better rates. Other financing options include taking out a personal loan if you need longer to pay off your sofa. But if you take this route, you’ll need to always make sure you make the minimum payments each month and make a note of when any interest-free period ends, so you’re not hit by interest charges.' Laura Suter from AJ Bell says: 'This will give you a set period interest fee and you just need to pay off the debt before that period is up. One alternative is to pay on a 0% interest credit card. To avoid this error, take time to research your options. It ultimately depends on your personal circumstances, for example how much you’re willing to spend and how long you need to pay the debt off. It's important to understand that 0% finance isn’t the only option you have when paying for your sofa, and it won't be the right choice for everyone.
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