You’ve either heard these commercials on the radio, seen them on television or in a newspaper… the “Buy Now and Don’t Pay for 2 Years” furniture sales events. Furniture stores are famous for this. Sounds great, doesn’t it? Get your furniture now and don’t pay for a year or two. Out of sight, out of mind, right? WRONG! Even if you could get approved for this type of financing, you don’t want to use it. Not only are the interest rates outrageous, but the financing is usually provided by some sort of sub-prime finance company, not the furniture store (although on the surface, it may appear that way).
Even if it says “no interest” don’t fool yourself. There’s interest. Just not initially. Most businesses aren’t in the habit of extending free, long term credit to consumers. Besides, with a bankruptcy appearing on your credit report, you probably won’t be approved anyways. Trust me.
How I Got The Furniture I Wanted When I Didn’t Have Enough Money
This month, I came to the conclusion that I needed new living room furniture. I still had the same cheap couch, coffee table and end tables that I bought when I was a college student about 15 years ago. And believe me, this furniture had definitely seen better days! Then I just happened to hear an ad on the radio for Brault & Martineau (a very large chain of furniture stores in Quebec, much like the Brick or Leon’s, which are also in Quebec). Normally those types of commercials are just background noise, but this time, I listened intently. They were having a 50% off sale on leather couches that week! Then at lunch time, I happened to notice a newspaper open to a full page ad from Brault & Martineau advertising the same sale. And as luck would have it, I was just around the corner from one of their stores and I had almost an hour left on my lunch break. It was meant to be!
Knowing how much money I have in my chequing account, I figured I could afford that much needed new couch, and especially at 50% off. There actually weren’t very many choices of sofas, but I came across a one that I really liked. I could have paid for it right there and then, but I noticed that there were other matching pieces that could go along with it. The only one I really considered was the matching love seat. Even at 50% off, I (just barely) had enough money available. But, I didn’t want to deplete all of my money, especially for something that is not an emergency.
Know The Difference Between Needs And Wants
Remember to make the distinction between “nice to have” and “essentials.” Living room furniture falls somewhere in between, perhaps leaning closer to the “essentials” side. Sure, you could sit on the floor in your living room, but realistically, who really does that? In my case, my old living room furniture was literally, and honestly, falling apart. In fact, I was embarrassed to have anyone over. So, this certainly qualified as an essential purchase. If your living room furniture is 5 years old and still in good condition, but the style is looking a bit dated, or you’d really like a different colour, then that’s NOT an essential purchase.
Since my bankruptcy discharge, and especially in the last year, I’ve been really good about saving money. Between automatic withdrawals for my mutual funds, GIC’s for my secured credit card, money I transfer to my savings account and an emergency/living expense fund in my chequing account, I’m quite proud of myself for managing my money so well – especially considering my income level this year. It’s OK, but not as much as I’ve made in previous years (that’s going to change very soon though, and for the better).
The sale at Brault & Martineau was almost over and I didn’t want to miss out on the 50% savings, especially since it was for something I truly needed. Having a couch isn’t a total necessity, but try living without one for a week and see what’s like. I did and it wasn’t very enjoyable.
Will That Be Cash Or Credit?
Not wanting to drain my chequing account or max out my secured credit card, I hesitated buying the furniture. The sales rep at the furniture store seemed eager for me to buy that couch and love seat. He suggested that I apply for a Brault & Martineau credit card. My first instinct was NO! But, just to satisfy my curiosity, I asked about the credit requirements. As I thought, any applicant with a bankruptcy appearing on his or her credit report will be denied. So I didn’t even bother applying. Why apply if you know you’ll be declined? That credit inquiry will lower your FICO credit score and will stay on your credit report for the next 6 years.
Then… It Hit Me! I Found The Answer!
I knew the financing plan was out of the question. Then I thought of something that is really overlooked these days in our credit-driven society: LAYAWAY! Yes, layaway. You simply pay a small deposit to hold your purchase and either make when you have the money available, or simply pay the balance upon delivery of your items. Of course, you don’t get the items until they’re paid in full. I had the option of having one piece of furniture delivered immediately and wait for the other one.
Instead, I chose to put down a 10% deposit and come to the store to pay the balance the following week after I received my next pay cheque. I arranged for the delivery of the furniture to be on my day off. Since there was only one day between the date of payment and delivery of furniture, I had to show the delivery driver my receipt that the furniture had been paid in full. The other option was to pay the driver, but I felt better paying by debit card at the store.
As I type this on my laptop, I’m sitting on my lovely new and comfortable leather couch. It feels great knowing that it’s fully paid for, and that I got it at 50% off! Layaway was an excellent way to take advantage of a sale on high ticket household items.
The Rules Are Different When You’re An Ex-Bankrupt
Your non-bankrupt friends (including those with spotty credit) may fall into the furniture financing trap and end up paying way more for their furniture due to the high interest charges. But YOU won’t! Why? Well, for one, you probably won’t be approved for financing with a bankruptcy appearing on your credit report.
But the best thing is, you CAN take advantage of great sales on furniture or major appliances if the store you deal with does layaway. You get the benefit of financing by not needing to come up with all of the money up front, but still get to “hold” the furniture and lock in the sale price but pay for most of it later. You also get the benefit of not having to pay interest! Of course, there is a time limit by which you must pay off the furniture. I was offered 3 months, but wanted the furniture much sooner and told them that one week would be fine.
Financing, Buy Now Pay Later and Layaway
The major difference between financing and layaway is that you don’t get possession of the items until they are paid in full. You can pay for them and receive them one piece at a time, or get them all at once like I did. Besides, it’s a good motivation to get the money together quickly when you know that you won’t receive your goods until you pay for them. With financing, you get the good first, and then pay for them later, which may have been one of the reasons you went bankrupt in the first place anyways!
Remember that items purchased on layaway do NOT report to the credit bureaus, since there is no credit or financing involved. You don’t get the goods until they are fully paid for. But, it’s certainly a good alternative to that expensive financing the furniture stores offer.
I should also mention that the rather slick salesman tried to stick me with leather protection for $180 extra. When I was looking at the furniture, he wanted to know if I’d like leather protection. I asked if it was free and he said “yes” and then went on to describe how good it was. So I said “sure, I’ll take it then.” I figured he would give me bottle of leather cleaner that I could apply to the furniture myself. When I looked at the invoice, it showed I was being charged $180 for leather protection! I immediately questioned this. They called the salesman back over and he became rather aggressive about this. I found out later that he works on commission. So, be careful about all of the extra add on features! I never bother with extended warranties or upgrades.
Think Outside The Box – Where Else Can You Get Amazing Furniture?
For the very astute readers, you may have noticed that I originally mentioned getting rid of my couch AND coffee/end tables. I only bought the couch and love seat from the furniture store. There was no sale on coffee tables or end tables. Perhaps they were hoping that people would buy new coffee tables and end tables at the regular price once they bought their couches at half price. Maybe if I had more money or the luxury of “buy now pay later” credit, I would have, but my spending money was near its limit.
I still needed a coffee table and end table but didn’t want to pay as much for them as I paid for the couches! I could have waited for sale on coffee tables to come around but I didn’t. You know what I did instead? I checked out the classified ads online on Craigslist and Kijiji. Buying a used coffee table and end table isn’t that bad. They’re not as likely to absorb smells and spills like soft furniture does. I would never buy a used couch or mattress, or any soft furniture that can absorb odors or liquids.
When it came to the coffee table and end table, I found a nice, gently used set for $150. It had belonged to an elderly lady who took excellent care of them. They were from a kid-free, pet-free and smoke-free home. On the underside, it shows the date of manufacture, and those tables were only 7 years old, built by a local furniture manufacturer. She said she had paid $600 for them when they were new. I can believe it, but used furniture often sells quite cheaply. Tables tend to wear better than couches which can get squashed cushions, stains or rips and more easily absorb odors.
If you need (and not just “want”) new furniture, consider using the layaway option that many furniture stores offer. You probably won’t be approved for the “buy now, pay later” financing, and even if you were, you’d be paying those outrageously high interest rates. Not to mention, it won’t look that good to have this type of financing appearing on your credit report.
Or, Just Save Up And Buy When You Have Enough Cash
Another option is just to set aside the cash or save up for a major purchase. Then when a good sale comes along, you’re ready to take advantage of it and pay in full, right on the spot. Avoid charging big ticket items to your secured credit card if it will almost max out your credit limit. This will report to the credit bureaus and lower your credit scores. Ideally, your credit cards should not be charged to more than 35% to 50% of the available credit limit if you want to maintain a good debt ratio and a good credit score.
One Last Alternative, Not For Everyone
Or, if you’re really frugal, buy your furniture used. Furniture tends to depreciate quickly. Look for ads on Craigslist or Kijiji. You may not find your dream furniture right away, but sooner or later it will come along. Personally, I’m not fond of buying any soft material furniture like a mattress or sofa as a used item, but if you don’t mind, then there are some great deals out there. I got my bargain priced solid oak coffee table and end table for a fraction of its original value.
Although these tips won’t help rebuild your credit, they address the issue of buying essential home furnishings when you can’t get financing. Sometimes, in our credit-driven society, it’s easy to forget there are other ways of buying furniture, like saving up and paying cash, using layaway or buying used furniture.
Enjoy your new furniture!