Thinking of financing that big purchase? It might seem like a quick win—no big payment upfront, and you get what you want right away.
But before you say yes, take a step back. Financing is a long-term commitment, and if you’re not careful, it can cost more than you expect.
These five questions to ask before financing will help you make smart financing decisions, so you don’t end up with regret down the road.
1. Do I Really Need This Right Now?
It’s easy to get caught up in the moment. A sleek new laptop or dream couch can feel urgent. But sometimes “I need this” really means “I want this.”
Ask yourself:
- Is this item essential today?
- Can I wait and save up for it instead?
- Is there a cheaper option that works for now?
If your washer just broke, that’s a need. If you’re upgrading your TV during a sale, that’s a want. Knowing the difference helps you avoid taking on debt for the wrong reasons.
2. Can I Afford the Monthly Payments—Every Month?
The sticker price may seem big, but the monthly breakdown looks small. That’s how financing gets you. But those payments don’t disappear when life gets tough.
Before financing, do the math:
- Add the monthly cost to your budget
- Factor in interest if it applies
- Ask what happens if you miss a payment
If your job is uncertain, your bills are already tight, or you have no emergency savings, financing might stretch you too thin. A good rule of thumb: If you can’t comfortably afford it with your current income, it’s not worth the risk.
Before you commit, take a step back and review your long-term goals. Here are Financial Planning Moves to Make Before You Turn 40 to help you build a stronger financial base.
3. What’s the Total Cost After Interest?
Zero-interest offers can be great—but only if you follow the rules exactly. Miss a payment or go past the promo period, and the interest kicks in. Fast.
Some plans charge deferred interest, which means they add months of interest charges all at once if you don’t pay it off in time.
Always ask:
- Is there interest?
- When does it start?
- How much will I pay in total if I stick to the plan?
A $1,500 fridge with 20% interest over two years doesn’t cost $1,500 anymore. It costs over $1,800—and that’s before any late fees.
4. Are There Better Ways to Pay?
Financing isn’t your only option. Before agreeing, consider:
- Can I pay with savings?
- Can I use a credit card with a lower interest rate?
- Does my credit card offer 0% APR for a few months?
Some stores push financing because it earns them money. But that doesn’t mean it’s your best deal. If you can delay the purchase and save up, you’ll avoid interest and stress.
Also, check if your bank offers a personal loan with better terms. Financing through a store may be convenient, but it’s not always the smartest financial move.
5. What Happens If I Need to Return or Cancel?
Plans change. What if the product doesn’t work out? What if you lose your job? Before you finance, find out:
- Can I return the item after opening or using it?
- Will I still owe money if I cancel?
- Does the financing company charge fees for early payoff or cancellation?
Some financing companies are strict. You might still owe the full amount even if you return the item or never use it. Read the fine print before committing.
Bonus Tip: Check Your Credit Score
Financing plans often require a credit check. If your score is low, you might not qualify—or you’ll be offered a high interest rate. And applying can sometimes lower your score, especially if you apply multiple times in a short period.
If your credit isn’t in great shape, take time to improve it before financing anything big. Better credit means better terms and less money wasted on interest.
Financing isn’t always a trap. It can help you spread out the cost of a major need or take advantage of a deal. But it only works if you go in with a clear head and a smart plan.
Ask these five questions first. If you can answer them with confidence, financing might work for you. If not, wait. Save. And give yourself the freedom of buying something when you’re really ready for it.
