Appliance financing: 5 types to consider

Appliances can be expensive. The average package price for a microwave, fridge, dishwasher, and range runs from $2,100 to $5,400, according to HomeGuide. Appliance financing can help soften the blow, but will usually cost more in the long run.

Here's a closer look at how appliance financing works, five different types of appliance financing available, who each type is best for, and how much it costs.

What is appliance financing?

Appliance financing allows you to use a credit product to finance an appliance. For example, if your refrigerator breaks down, you can use an installment loan, credit card, or line of credit to get a new one. You will then pay off the amount you borrowed over time.

There are multiple ways to finance an appliance, and your repayment and cost will depend on the type of financing you choose. Here are five different options.

1. Personal loans

Best for: Expensive appliance purchases, long-term budgeting needs at fixed rates

Personal loans are installment loans that provide you with a lump sum up front, often up to $50,000 or more, depending on the lender. And unlike credit cards, most personal loan interest rates are fixed, which means you repay the amount borrowed through fixed payments over a set term.

Personal loan repayment terms typically top out around seven years, but longer loan terms of up to 12 years may be available if the appliance purchase is considered a home improvement. Since personal loans provide longer repayment terms than most other types of appliance financing, they may be best for major appliance purchases or for long-term budgeting needs.

Good to know: The average personal loan interest rate on a two-year personal loan is 12.49%, while average credit card rates are 21.59%, according to the Federal Reserve.

2. In-store financing

Best for: Short-term financing, 0% financing offers, fair and good credit

In-store financing is available directly at the retailer's online store or physical locations. For example, RC Willey sells a wide range of appliances, from refrigerators and dishwashers to washers and ovens, both online and across a handful of states. Its financing programs include:

• 12 months 0% interest and no down payment for purchases of $299 or higher
• 18 months 0% interest and no down payment for purchases of $1,999 or higher
• A Premier Plan with a fixed 9% annual percentage rate (APR) and monthly payments as low as $15 for purchases of $299 or higher for up to 63 months

Programs like these are available through multiple retailers, but you should watch out for deferred interest on 0% APR promotions. In other words, some 0% APR offers only apply if you repay the balance in full within the promotional period.

So if the balance is not paid in full by the end of the promotional period, you'll owe interest from the purchase date (this is what you would have paid based on the loan's standard APR).

3. Credit cards

Best for: Short-term financing, 0% financing offers, good and excellent credit

You can also finance an appliance using a good old-fashioned credit card. Upon approval, the lender will give you a credit line with a maximum limit. If the limit is high enough to cover the cost of an appliance, you can use the card to make the purchase. Card providers typically only require a minimum payment each month, but charge interest on any outstanding balance that carries over beyond the billing cycle's grace period.

Interest rates on credit cards are higher than those on personal loans, on average, but some cards come with interest-free promotions. The Discover it Cash Back Credit Card, for example, currently has a 15-month 0% introductory APR on purchases and balance transfers. With a deal like that, as long as you pay off the appliance within 15 months, you wouldn't pay any interest on it. However, once the introductory promotional periods end, regular interest rates go into effect.

Store credit cards

Along with applying through popular credit card issuers like Capital One, Discover, or Chase, you may want to look into store cards from retailers that sell appliances. For example, Best Buy currently offers 18-month no-interest financing on appliance purchases of at least $599 if you buy them using the My Best Buy Credit Card.

Note that the Best Buy offer is a deferred interest promotion - if you don't pay off the balance in full, you'll owe interest retroactively, from the purchase date, at the card's standard rate.

4. Rent-to-own

Best for: Borrowers with bad credit

Some stores, including RC Willey, offer lease- or rent-to-own options. Rent-to-own financing allows you to pay off an appliance on an installment plan until you've paid it in full. The repayment process varies from retailer to retailer. Some stores require weekly, biweekly, or monthly payments.

Rent-to-own is typically an easier application process than applying for a credit card, in-store financing, or a personal loan. Lenders rarely require credit checks, which is beneficial if you have bad credit.

Payments are typically interest-free, but that doesn't mean you won't pay to finance this way. You can expect fees comparable in cost to personal loans and in-store financing options. One thing to note with this method of financing: If you fail to make payments, your appliance can be repossessed.

5. BNPL

Best for: Very short-term financing, an alternative to personal loans, credit-challenged borrowers

Buy now, pay later (BNPL) loans are offered by companies like Affirm, AfterPay, and PayPal. They typically allow you to split a purchase into four biweekly payments with no interest, or opt for a longer term that often involves interest charges.

When you're making a purchase from a retailer and BNPL is available, the option may appear on or before the checkout page. Alternatively, you can create an account in a BNPL app, get prequalified, then browse their network of partner stores and make purchases through a handoff to your retailer of choice.

How does appliance financing work?

Appliance financing involves using a credit product to purchase an appliance so you can pay off the balance over time. The repayment terms and cost depend on the loan type you choose. But the general route to apply for appliance financing is similar across types. Here's how it works with personal loans:

1. Prequalify: Check to see if you prequalify for a personal loan to see rate estimates before applying. Most lenders offer prequalification online and run a soft credit check that won't hurt your credit. Just note that you may need to provide some personal information like your Social Security number to get customized quotes.
2. Compare your options: Collect a few quotes and compare them to find the best deal. Consider loan amounts and terms, monthly payment amounts, fees, interest charges, and overall costs. While keeping costs down is important, it's generally more important to go with a payment you know you can afford.
3. Apply: If you find a loan that works for you, complete the full application process with the lender. This step often includes a hard credit check, which could temporarily impact your score, and the verification of your identity, employment, and income.
4. Review the loan agreement and sign: If approved for a loan, the lender will send documents your way to review and sign. Make sure the loan's fees, interest rate, repayment term, and monthly payment amount is what you expect before signing.
5. Buy the appliance: Once you've agreed to the loan, the lender transfers the loan funds to your bank account, which you can then use to buy the appliance. Most personal loans fund within a few days of approval.
6. Repay the loan: Make all of the loan repayments on time and in full to maintain healthy credit and enjoy your new appliance.

Learn more: How to get a personal loan

Pros and cons of appliance financing

Pros of appliance financing

• Low-to-no down payment: You can often buy an appliance with little-to-no money down.
• Multiple options available: A wide variety of credit products are available.
• No-interest offers: No-interest financing is available from some lenders and companies. But check whether the no-interest promotion requires full payoff within the promotional period.
• Affordable monthly payments: Whether you need short- or long-term financing, you can often split up the cost into affordable monthly payments that fit into your budget.
• Bad-credit options available: Rent-to-own is one option if you have bad credit. If you have fair credit, you might also qualify for in-store financing, a store credit card, and BNPL.

Cons of appliance financing

• Credit check: Approval for appliance financing often depends on your credit. If you don't have good credit, you'll have fewer options. Plus, a hard credit check may be required, which could damage your credit score.
• Interest and deferred interest charges: Lenders may charge interest from the start, or after a promotional introductory period. Deferred interest promotions require that you pay interest retroactively (from the purchase date) if you don't pay off the balance in full within the promotional period.
• Fees: Credit products can come with fees, such as application or origination fees.

Appliance financing for bad credit

If you have bad credit, you'll likely find it harder to get appliance financing. However, certain credit products and lenders are more flexible than others. For example, BNPL lenders tend to be more lenient with approvals along with stores that offer rent-to-own or lease-to-own arrangements.

For longer-term financing, some lenders offer personal loans for bad credit, such as OneMain Financial, Upstart, and Avant. If you still have trouble getting approved, consider applying with a cosigner or pledging collateral.

Frequently asked questions

What credit score is needed for appliance financing?

The credit score you need to finance an appliance varies by lender and credit product. For example, Affirm doesn't have a set minimum credit score but considers your score along with a variety of other factors, such as your income, credit utilization, and whether you've had recent bankruptcies. On the other hand, Prosper requires a minimum score of 640.

Related: Credit score for a personal loan

Can you buy appliances with a home loan?

Traditional first mortgages can't generally be used to buy appliances. But if you get an FHA 203(k) rehab loan, for example, you can use the funds for home improvements, which can include new appliances.

You may also be able to negotiate a seller or lender credit if you're buying a home that allows you to reallocate funds from your closing costs to cover appliances. If you're an existing homeowner with sufficient equity, you could take out a home equity loan or a home equity line of credit to pay for appliances.

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