Pay monthly furniture: how does interest-free credit work and which stores offer the best deals?

A record number of retailers are offering interest-free credit to help you furnish your new home or buy those expensive appliances you might otherwise struggle to afford. But how does it work? And will it land you in trouble? 

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What’s the deal?

Interest-free credit agreements allow you to borrow an amount of money over a set period with no interest charged. They often don’t even require a deposit, which means you don’t need to part with any cash until the first direct debit payment. You can usually, however, choose to put down a deposit, which will reduce your monthly repayments. 

Retailers don’t just hand out deals to anyone — you will need to meet eligibility criteria which may differ from shop to shop. Your application might be online or in person, but either way there will be a lengthy form to fill out. 

You will need to provide details such as your employment status and a history of addresses. A credit check will be carried out where they will be looking for a good, clean history of repaying debts, including credit cards.

Who is offering what?

Lombok, Sofa Workshop, Marks & Spencer and Laura Ashley are among those offering interest-free credit without a deposit. 

Lombok allows borrowing for up to four years as long as you spend over £250. That means a £4,000 shopping spree will cost £83.33 a month for 48 months.

At Sofa Workshop, splashing out on a statement sofa won’t put such a dent in your pocket if you use its three-year interest-free credit offer. With no deposit, a £1,849 sofa, such as the large Eden in Dusky Velvet, in the ocean colourway, would cost £51.36 a month for 36 months.

£51.36 a month: the cost of this £1,849 large Eden sofa from Sofa Workshop, in Dusky Velvet ocean, bought with a three-year interest-free deal

At John Lewis you can get interest-free credit on up to £25,000-worth of shopping for up to 24 months — as long as you can afford a 10 per cent deposit, or a 20 per cent deposit for a new kitchen or bathroom.

At Ikea you can get up to 36 months of interest-free borrowing. You just need to pay a £10 deposit. 

There are plenty of other brands that offer interest-free credit. It’s not always heavily publicised so if you can’t find any information in store or on the website it’s worth asking.

What’s the catch?

“Free money” is always good but don’t be tempted to overspend. The idea is to spread the cost, not to rack up a list of debts. Interest-free credit deals are formal loans with a contract, so you need to be sure you can afford to make each and every repayment to protect your credit status. The loan will usually be with a lender on behalf of the retailer. Should you become unable to make the repayments you will be subject to extra charges and it could land you in legal hot water with a court date and a blemished credit record.

You must also consider the effect numerous loans will have on your credit rating. A lengthy list of borrowing could be troublesome when the time comes to remortgage, as banks and building societies might be wary of those with lots of debts.

And don’t confuse interest-free credit with buy-now-pay-later finance deals. These almost always charge high levels of interest. 

Are interest-free credit cards a better option? 

There is another way to spread the cost of a shopping spree without signing up to a string of credit agreements, and that’s by using a credit card offering nought per cent on purchases, sometimes for quite long periods. Check out the comparison website for the best deal at the time you need it. At the moment, the card offering the longest period at zero per cent is from Sainsbury’s Bank. Its Purchase Credit Card gives you three months to spend, and you won’t pay a penny in interest on the balance for 31 months. 

Purchase card: Sainsbury's Bank lets you spend for the first three months and pay back over 31 months interest free

It’s crucial you make sure you are able to repay the full amount before any interest-free period offer is up. After this, the rate reverts to about 18.9 per cent. 

As ever, if you can’t control your spending or be disciplined with your repayments, this kind of credit is not for you.

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