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In-Store Finance

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In Store Finance

In Store Finance is a very tempting way to buy household goods – you typically get offered a “no repayments, no interest” for an amount of time (12-24 months), after which time you start paying horrendous amounts of interest.

Many people fall into the trap of taking out in store finance, convincing themselves that they will be able to pay it off later – but so many people don’t pay it off later and end up paying more than twice the price of the original purchase!

So some things you need to know about in store credit cards and finance are:

  • You loose your ability to haggle or negotiate a better price – stores need to make money from the deal too, so you’ll find that they won’t negotiate the purchase price as much as if you use cash.
  • Interest rates on store finance are higher than personal loans and are often the same as credit cards. So when you DO start having to make interest repayments – you get hid hard!
  • When you do start making payments on the loan, the minimum repayment on the statement is not the minimum you need to may to repay the loan. Sometimes it isn’t even enough to cover the interest charges! So if you only pay off the minimum, you’ll go further into debt.
But you CAN use In Store Finance to your advantage and they can be a good short-term option for making purchases. But you MUST do the following:

  • BEFORE you make the purchase, work out how much you need to pay back each week to pay off the full purchase price within the interest free period. For example, if you borrow $1,200 over a 12 month interest free period, then you need to be able to repay $100 per month (from $1,200 / 12 months) to pay back the loan in time.
  • Are you able to pay back this amount ($100 per month in this example, but whatever you’ve worked out for your purchase) or are you kidding yourself?
  • If you are confident that you CAN repay this amount and can’t pay cash upfront, then take up the finance offer and PAY BACK the amount you’ve calculated for each and every month!! If you don’t think you can make these voluntary repayments – don’t get the finance!! Save up the money instead, and then you can negotiate a better deal in cash.
If you follow these 3 steps, you’ll pay off the finance before the crippling interest charges hit. And even if you pay off most of the finance, you’ll still save a lot of money in interest payments.
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We are not certified financial planners or advisors. The information in this website is general information only. Always consult a licensed financial planner before making any finance or investment decision.

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