By Cris Carl, Networx
Every home and every home owner has their own unique needs. Plus, as a home owner, you may be looking at upgrading for better energy efficiency, improving the look of your home, or simply having more fun stuff. While it is still a good philosophy to only purchase items you actually have the cash for today, credit and budgeting payments over a period of time is always an attractive option if your credit rating is good. If your credit rating is poor, you will often pay enormous interest rates. It’s hardly ever worth it to pay two to three times what the item is valued.
Also, I have worked with low-income families for 18 years, and the worst choice anyone can make is trying to buy items for your home from a rental business. Rental businesses are great for special items for a Super Bowl party, but if you are trying to furnish your home from a rental business, you’d be better off going to yard sales.
If you are looking to get a new couch, bedroom set, stove, etc., shop around, which these days can mean going online. If you have a clear idea of what you want specifically, including the item’s dimensions and qualities, you are in a better position to dicker at the store. As many sales people work on commission, there is sometimes built-in unadvertised wiggle room when it comes to price.
Naturally, you want to check for sales, but more so, if looking to buy home items on credit, compare each store’s interest rate. Some businesses may offer what appears to be an unbelievable deal, but if you are paying a 28 percent interest rate over a long period of time, you may want to keep looking or wait a little longer and save your money.
Figure out how much you can pay over what period of time. If you can, try to make larger payments or pay more than the minimum when you can to cut down on paying interest.
Also, cut your cost by picking the item up yourself if you can. Watch out for delivery costs and “extras” sales people look to add on aside from general warranties. Don’t pay for what you don’t really need. Good sales people can be very convincing, as it ups their commission – which is fine; it’s their job. Just be aware.
Energy Efficiency Savings vs. Credit
Most appliances you purchase these days are Energy Star rated. The Energy Star rating will give you a good idea of how much comparatively you can save over time over what you may currently own. For example, if you are buying a refrigerator, and you figure out that you’ll save $200 a year on energy costs, you might be able to cover the cost of interest (depending on the rate) with those savings. The good news is, once your appliance is paid for, you’ll simply have savings. You'll need to do a home energy audit to estimate your energy savings.
Durability and Quality
Take the time to research the home item you’d like to purchase. Like most things, there will be a wide range of options that generate the price tag. Look at company reviews. In the Northeast there is a discount furniture chain that has been growing like an amoeba for over 20 years. However, the company has a poor track record with quality and customer service. If you have to buy another couch or kitchen chairs in two years, you are wasting your money.
The one possible exception to this rule is electronics. Upgrades and new technology are expanding so quickly, you will need to assess how long you can live with this year’s latest to make those credit payments worth it.
One last consideration when buying your home items on credit is how much the item will potentially cost to maintain over time. For example, I have an inexpensive pellet stove that I purchased on credit. The stove has more than paid for itself in the years I have owned it. In fact, it paid for itself in the first two years I owned it. However, aside from buying pellets and the stove, I also had to pay to have it installed. In addition, the stove has needed three repairs in about five years and I needed to put a grated cap on my chimney to keep squirrels out. I likely would have saved money over time if I had purchased a better quality stove.
So, when buying home items on credit, shop smart and do the math.