Whether you have bought a new house or planning to give your existing home a new look, purchasing brand-new home furniture is almost non-negotiable. It is the furniture that adds warmth, comfort, and a loving vibe to your space. But the thing about purchasing home furniture is that it is an expensive deal. Ranging from thousands to lakhs, a home furnishing budget can jolt your pockets.
Buying a complete furniture set that includes a sofa, dining table, centre table, and balcony chairs, can cost in few lakhs. If you do not want to wait for months to be able to afford the furniture you desire, then getting a personal loan can be your best bet. Many financial institutions have stepped forward to offer a loan for furniture to alleviate your burden.
What are Furniture Loans?
A loan for furniture is essentially a personal loan offered without collateral. The lender grants this loan up to a maximum of Rs 5,00,000 with a 60-month flexible repayment period. The approval amount and interest rate depend upon your occupation status, work experience, monthly income, and credit score.
There are many reasons to finance your new furniture with a personal loan. Among these are -
1. Collateral-free
A furniture loan is an unsecured form of financing in which the lender does not request you to put up a collateral as guarantee for repayment. The collateral can be either the item you purchased or any other asset you own, just like in car-loan or two-wheeler financing. But in personal loan this is not required.
The lender checks your credit score, income source and repayment capability before granting you the loan. Though it is an unsecured loan repaying your EMIs on time is very crucial. The lender has the right to file a lawsuit against you. And you may lose various possessions at the discretion of the court. Also, it will impact your credit score which will make it difficult for you to secure future loans.
2. Easy Application
You do not need to visit a lender's branch for buying furniture on loan. You can apply for this loan product through a financial institution's official website or a digital lending app. Share your name, income, age, and other information on the website/application, and upload a few documents.
Whether you buy furniture from an e-commerce website or directly from the store, you will get the 'Buy on EMI' option. Nowadays, e-commerce platforms have partnered with several financial institutions to provide easy financing options. The offline stores also have representatives from different lenders who can help you buy the products on finance.
3. Instant Approval
You do not have to wait months to get your preferred sofa set. Lenders approve this loan in minutes and disburse funds in 24-48 hours. All this is possible because of the use of cutting-edge technology.
The web-based or mobile application of new age lenders deploys Artificial Intelligence (AI) and Machine Learning (ML) technology. It aids in quick furniture loan application evaluation and credit appraisal.
4. Multiple Usages
Remodelling a home is not limited to replacing old furniture. You will also require funds to replace appliances, change wall colours, get the repairs done and so on. So, do you need to get a separate loan to meet the other requirements? The simple answer – is "NO".
Personal loans for furniture come with usage flexibility. You can use them for several purposes, and your lender will not require you to provide a reason for doing so. The loan amount is credited to your account, and it is completely upon you to determine the end usage.
5. Flexible Repayment Tenure
The repayment period is critical for budget management. It has a direct impact on your EMI and interest payments. If you choose a longer payback period, the applicable EMI will be much lower, but the interest payable amount will rise.
With a furniture loan, you can choose your repayment period. Use the personal loan EMI calculator to determine the optimum loan amount.
Check the table to understand the repayment period's impact on the EMI and interest.
Parameters
Repayment Tenure
12 months
24 months
36 months
48 months
60 months
Loan amount
Rs 5,00,000
Rs 5,00,000
Rs 5,00,000
Rs 5,00,000
Rs 5,00,000
Interest rate
11%
11%
11%
11%
11%
EMI
Rs 44,424
Rs 23,537
Rs 16,607
Rs 13,167
Rs 11,122
Interest outgo
Rs 33,093
Rs 64,882
Rs 97,858
Rs 1,32,012
Rs 1,67,333
You can see how a loan with the same amount and interest rate but a different repayment period affects your budget.
6. Boost Credit Score
If you intend to apply for a large loan in the future for a house purchase, office setup, or other purposes, availing a furniture loan can be extremely beneficial. Given the small amount of up to Rs 5,00,000, repaying your debt obligations on time will significantly improve your credit score.
What Factors Should You Consider When Applying for a Furniture Loan?
Although a personal loan for furniture is easily available, you should not apply for one without first considering the following factors.
Examine your credit report before applying for a furniture loan. Check for any negative remarks, such as late EMIs, multiple hard inquiries, and previous cases of settlement. Poor comments on the report will result in the loan application being rejected or higher interest rates.
Understand your debt-to-income ratio as well as your other financial obligations. Financing furniture will only lead to a debt trap if you have several debts and very little disposable income.
Always have a solid repayment plan in place. Use festival bonus, windfall profit, or increment to increase your EMI amount at regular intervals if possible. After the first twelve months of borrowing, you may also choose the prepayment option. These small steps will improve your creditworthiness while saving you money on interest payments.
Furniture loses its value over time. If you replace your sofa or dining table every 3-5 years, this loan product is not for you.
Consider the uncertainties like job loss, financial crisis, health issues, or other unforeseeable factors before applying for a loan. Keeping your obligations at a minimum is a smart idea.
Personal loans for furniture are available from a variety of lenders. You only need a steady income, stable employment, and a good credit score. Because the loan is available without collateral, you must have a solid repayment plan to avoid getting hit with a hefty penalty. Also, make sure to do thorough research comparing the interest rates and charges offered by different lending institutes.
Frequently Asked Question
How quickly can I receive funds after approval?
Once approved, funds can be disbursed within a few days, allowing you to promptly purchase the furniture you need.
What happens if I cannot repay the loan on time?
Missing repayments can affect your credit score and may incur penalties or additional fees. Contact your lender immediately if you foresee difficulties in repayment.
What should I prepare before applying for a personal loan?
Gather documents such as identification proof, income statements, and credit history reports to streamline the application process.
Katyaini is a finance expert with a focus on the non-banking financial sector, bringing over 8 years of experience in NBFC. She specializes in simplifying complex financial concepts for readers, helping them navigate the NBFC landscape. Outside of work, she is passionate about travelling.
