Finance a Major Purchase Instead of Paying Cash | Credit Direct Blog

Whether your bathroom shower needs replacing, you sprung a leak in the kitchen sink or you need a new refrigerator ASAP, financing a major purchase could make more sense than paying cash. If you’re strapped for cash at the moment but need that new sofa set NOW, you may want to consider personal loans for a major purchase. Heck, even if you have the cash, it may be wise to fund major expenses so you can keep the money you do have liquid in case of emergency.


Credit Direct offers personal loans up to $40,000 to fund major purchases, such as when little Johnny breaks his leg and you are faced with growing medical, x-ray and physical therapy bills. Many people aren’t prepared for emergencies such as these and can benefit greatly from a loan to help them bridge the gap.


Let’s take a look at when you should finance a major purchase with a personal loan instead of using up your available cash.



You Qualify for a Low Interest Rate

When you can qualify for a low interest rate, it may work in your favor to finance that major purchase rather than pay in cash. Let’s say you’re looking at a $30,000 vehicle. You may have all that in cash and could fork it over. OR, you could put $5,000 down on the loan with a two percent interest rate on $25,000 for three years. The interest you’d pay is only $700 – not bad for borrowing 25 grand.

Now, with that $25,000 cash you still have, you can invest it and earn a five percent interest rate at $1,250 in the first year. You can see this is a much better investment. This option only works, though, if your credit is good and you can qualify for a low interest rate. You’ll have to run the numbers to see if this makes sense for you.



You Don’t Have Enough Money in Reserve

In an ideal world, you would have a lot of money saved up in your emergency fund to pay for things like a major vehicle repair or a new washer/dryer. But reality dictates that many Americans simply don’t have cash reserves after paying all their essentials every month. Ask yourself these three questions:

  • Do I have an emergency fund in place with at least $1,000?
  • Do I have enough money to cover insurance deductibles?
  • Do I have enough savings to cover three months of living expenses?

If you answered no to any of these, you’re best off holding on to the cash you do have and taking out a personal loan for those unavoidable major purchases. In the meantime, try to save a little bit each month to build up your accounts for the above three bullet points.


You Want to Boost Your Credit Score

Your credit score is a key indicator of your financial health that tells lenders how good you are at managing finances and debt. This score will dictate how much of an interest rate you can get on a loan or even if you can qualify for a loan in the first place. If you know your credit score is lacking, you should actively work on building it back up. It will take time but it’s worth it in the end.

Essentially, lenders want to know that you are worth lending to. When you take advantage of financing options, you get a chance to build up your credit score. If you stay in good standing throughout the life of that loan, you will see improvements to your credit score. Regular on-time payments are the best and fastest way to achieve and maintain good credit.

When trying to decide on the best way to fund your major purchase — whether you go with cash, financing or personal loan—make sure you not only understand your financial priorities but then make the choice that is most beneficial to you.


It’s Easy to Apply Now

The unexpected has a way of showing up, well, unexpectedly. Be prepared for life’s curve balls and know your options. Contact Credit Direct and apply now for personal loans for a major purchase.

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