Sometimes life throws you lemons.
Things break. Stuff needs replacing. And other essential bits and pieces need purchasing.
Equally, you might just want to treat yourself. After all, the latest gizmo just came out and you have to get your hands on it! But, alas, the cash just isn’t there to do it right now.
You’re not alone. In fact, 58% of Americans have under $1,000 set aside for a rainy day. And, according to the same source, 32% of those people have absolutely zero cash put away.
Those are scary statistics. After all, it means millions of people around the country couldn’t respond to an emergency financial situation. Equally, they wouldn’t be able to afford the things they want or need in a hurry. What are they to do?
Well, point-of-sale financing is one potential way forward. But what is it, and what are the pros and cons?
Keep reading to discover all about point-of-sale financing and whether or not you should use it.
What is Point-of-Sale Financing?
In its most basic form, point of sale financing is a handy new way to pay for the things you need.
Essentially, whether you’re shopping online or in-store, you’ll be offered the chance to pay by a line of credit/personal loan. It’s akin to using a store credit card for a specific item, or set of items. At the checkout, rather than whipping out cash or your credit card, you enter your personal information.
A soft credit check will determine whether or not you’re eligible. Within a matter of seconds (sometimes minutes), you’ll be told if you can make the purchase.
With permission granted, all that’s left to do is sign a contract to complete the checkout. You may pay an initial installment there and then.
However, it will be a fraction of the actual retail price and you get to walk away with the item! Repay the remainder over time, in line with the credit duration.
Should You Use It?
Point-of-sale loans might sound ideal. However, there are definite things to take into consideration first. Here are the pros and cons to know about. Take these into account to decide if this novel payment option is right for you.
Pro #1: They’re Financially Convenient
As we’ve seen, millions of people around the country don’t have any savings in the bank.
That means expensive one-off payments can be impossible to cover. Essential household items are left on the shelf out of sheer necessity. Traditionally, the only other option is to take on credit card debt or to apply for a loan. And these may or may not be available, depending on credit scores.
Point of sale loans provides a useful alternative.
Suddenly, expensive items of furniture, or pieces technology, for example, are available for purchase. Having insufficient cash when you need it is no longer a problem. Instead, there are just fixed payments to make each month.
Spreading out the repayments renders essential items more affordable.
Pro #2: Easily Available
Another major advantage of this financing option is its availability.
Anyone new to credit (for instance, if they’ve just arrived in America) will still be able to access the funds. It takes time to prove your financial trustworthiness to banks. Some people may not have had enough to time do it.
Point of sale loans skips typical banking bureaucracy. The money is offered with less credence given to credit scores, for example. In this way, it’s easier to get the credit required for the purchase.
Equally, the decision is made exceptionally quickly. You can know within seconds if you’re eligible. Compare that to traditional means of getting finance, which can take significant lengths of time.
Con #1: The Interest Rates
The added convenience and availability of this payment option comes at a price.
Like all loans, there’s an interest rate attached to your purchases. It’s true that you pay off the item over time. However, in doing so, you pay more for the item than it is worth/retails for.
Furthermore, interest rates can be high. Now, you may be lucky enough to enjoy 0%-rates on promo offers. In general, though, annual percentage rates can reach sky-high levels of 30% or more. It’s for consumers to decide if it’s worth it.
If money is a major issue, then patience is a virtue! Opt to save up over time for your expensive purchase. Only use POS finance as a last resort.
Con #2: Breakages
What happens when an item you buy (that’s under warranty) breaks?
You take it back, exchange it for a new one, or ask for your money back. Right?
That’s easier said than done with POS loans. Returns can be problematic. For instance, if that expensive item gets stolen, lost, damaged or broken, then you may still have to pay for it. Don’t, and your credit score can be affected.
Con #3: It’s Too Easy
POS financing makes it tempting to buy things you don’t need and can’t afford.
After all, it’s there if you want it! You just have to sign a document saying you’ll pay it off over time. As a result, overspending, in the long run, becomes all too easy.
This is particularly bad news if you already owe money. Think twice about POS loans if you have to pay back debt elsewhere. The additional monthly payments, especially on unnecessary items, can create a heavy financial strain that could have been avoided.
Time to Wrap Up
There you have it: everything to know about point-of-sale financing to decide if it’s right for you.
America is a country full of financial woes. Every year people take on more debt to keep up with repayment obligations and cover one-off expenses. A lack of savings makes it far harder to manage moments where instant finance is required.
As we’ve seen, POS loans provide a helpful alternative to traditional credit options. That said, like any loan, they should be considered carefully before taking on the debt. Ultimately, whether or not it’s right for you will depend on your particular situation.
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