Considering a personal loan or lease-to-own financing? Learn how each option works, their pros and cons, and how to choose based on your needs and timing.

Key takeaways

• Get durable items like appliances, furniture, and tires with lease-to-own financing.
• Personal loans may work better for non-durable needs and stronger credit profiles.
• Speed and product type can guide your decision.

What are your options when you need a big-ticket item, such as a fridge, mattress, tires, sofa, and don't want to pay for it all upfront? Two common ways to pay over time are a personal loan and lease-to-own financing.

This guide compares lease-to-own vs. personal loans, including how each works, how to apply, and how having a low credit score could impact your choices.

What is a personal loan?

A personal loan is a lump sum of money you borrow from a bank, credit union, or online lender. You repay it in fixed monthly payments, usually over one to five years.

Approval often requires good to excellent credit. Lenders look at your credit score, credit history, income, and debt-to-income ratio. Many lenders have hard minimum credit score requirements, although some offer loans to borrowers with lower scores. People with good or excellent credit scores (690 or higher) typically get the best annual percentage rates (APR) and terms. If you qualify, you’ll get a fixed APR and a set monthly payment.

You can use the funds from your personal loan for almost anything - furniture, medical bills, moving costs, travel, or consolidating debt.

Pros of personal loans:

• Cash flexibility for any purpose
• Fixed monthly payment and payoff date
• Potentially low interest if you have strong credit

Cons of personal loans:

• May take days to a week for approval and funding
• May be harder to qualify with low or no credit or recent credit issues
• Late payments may hurt your credit score

What is lease-to-own financing?

Whether you’ve heard it called lease-to-own, rent-to-own, or lease-purchase, the concept is essentially the same. Lease-to-own financing is typically available on durable goods, such as furniture, appliances, electronics, mattresses, and tires.¹ In a lease-to-own agreement, the merchandise is generally available immediately or quickly delivered, making it a convenient option for essential items, such as appliances, that are hard to live without.

Snap Finance is a leading provider of lease-to-own financing. How does Snap Finance work? In a lease-to-own agreement with Snap Finance, Snap purchases the merchandise from the retailer and then leases the merchandise to you, the customer.

As part of your agreement, you make payments over time to Snap. Once you make all your payments and have completed the terms of your lease agreement, you obtain ownership of the merchandise and it's yours.

Lease-to-own or rent-to-own are opportunities to rent merchandise without the commitment of buying. It is not a loan or credit.

Pros of lease-to-own financing:

• You may be approved even with low credit or no credit²
• Instant or same-day decisions in many cases
• Lease-to-own financing offers a predictable payment schedule.
• Early ownership or payoff options can reduce total cost of lease

Cons of lease-to-own financing:

• Lease-to-own financing is only available at participating retailers.
• Only certain durable merchandise can be leased, depending on the financing provider.
• Total cost depends on term length and when you complete the lease agreement.

When lease-to-own might be the better choice for you

Lease-to-own can be a practical solution if you need a specific item right away and are working through credit challenges. With Snap Finance lease-to-own financing, for example, all credit types are welcome to apply.² You can apply in minutes and get a decision in seconds.

This option is ideal when you need essential items immediately, such as a mattress, refrigerator, laptop, tires, or other durable merchandise. With lease-to-own options like leasing electronics with no credit, you can get what you need without waiting.² If you prefer a straightforward plan with fixed payments and a set schedule, the revolving debt of credit cards, lease-to-own may be your choice. Lease-to-own financing provides predictable costs. You’ll know your payment amount from the start of your lease and often have the option to reduce the total cost by buying out your lease early. It’s also an option when you want to pay over time for appliances or furniture without traditional credit hurdles.

When a personal loan might work better for you

A personal loan may work for those with stronger credit who need financial flexibility. It’s particularly useful if you need cash for nondurable goods or services, such as medical bills, travel, school expenses, moving costs, or multiple smaller purchases.

Those with excellent credit may also benefit from lower interest rates. Additionally, personal loans can consolidate debt. That could simplify payments and possibly reduce interest rates for those who qualify for a lower APR compared to existing accounts.

Snap Finance vs personal loan: How do you choose?

Choosing between Snap Finance vs. personal loans comes down to what you need, how fast you need it, and your credit profile.

• Speed and access: If you need an item today and you want to finance big purchases with no credit needed, Snap Finance lease-to-own financing is often faster and more accessible.²
• What you’re buying: If you want specific durable goods from a participating store, lease-to-own financing from Snap Finance can fit your needs. If you need financing to pay bills or get services, lease-to-own financing won’t work for you.
• Credit realities: If your credit is limited or you’ve had past issues, Snap Finance lease-to-own financing may be able to help you get what you need.² If your credit is strong, a personal loan may work for you.
• Total cost: Compare your options. With Snap’s lease-to-own financing, ask about early ownership plans that lower your overall lease costs.³ With personal loans, look at APR, fees, and total interest.

Application tips for both options

Whether you choose lease-to-own financing or personal loan, these steps can improve your shopping and financing experience

Set a realistic budget to help manage your finances effectively. Start by adding up your monthly income and subtracting your fixed bills. Be sure to leave room for savings and unexpected costs. Then choose a pay-over-time option that works for you.

Identify your must-haves vs. nice-to-haves. If an essential item like your fridge breaks, that’s a must-have. But if your TV still works, replacing it can wait if money is tight or you’re working on rebuilding your credit or savings.

Look at total cost when comparing financing options - not just the monthly payment. For personal loans, pay attention to the APR, origination fees, and any prepayment penalties. For lease-to-own agreements, review the payment schedule, total cost if you complete the term, and any early payoff or ownership options.

Timing can also play a significant role in your decision. If you need an item quickly, consider how fast you can secure financing with lease-to-own vs. personal loans. If you have more time, shopping around for personal loan offers may lead to better rates and terms.

Paying early can help you save. If you're able, consider early ownership options to save on overall lease costs for lease-to-own financing. For personal loans, paying extra each month or making a lump sum payment can reduce interest. With either option, make sure you understand how any promotional periods or early payments affect your agreement.

Next steps

Both personal loans and lease-to-own can help you pay over time for big purchases. If you want cash for different expenses and you have stronger credit, a personal loan may be right for you. If you want a fast, simple way to get essentials, such as furniture, mattresses, tires, or appliances, and have less-than-perfect credit, lease-to-own financing may be your answer.

Interested in applying for Snap Finance lease-to-own financing?

The Snap Finance application process is designed to be fast and simple, whether you’re applying online or in a store.

Here's how you can apply:

• Apply online at snapfinance.com or through the Snap Finance mobile app (IOS or Android).
• Apply in-store at one of Snap's retail partners through our text-to-apply feature on your smartphone or a QR code. Look for information about Snap in the store or ask a sales representative for help. To find a Snap Partner, go to the Snap Finance Store Locator.
• Apply and check out online with our select e-commerce Snap Partners. To find an e-commerce Snap Partner, go to the Snap Finance Store Locator.

Want to learn more? Check out these resources from Snap Finance:

• What’s the difference between a loan and a lease?
• Lease-to-own 101: How Snap Finance works from application to ownership
• Does Snap Finance help build credit? How Snap works and what to expect

The advertised service is a lease-to-own agreement provided by Snap RTO LLC. Lease-to-own financing is not available to residents of Minnesota, New Jersey, and Wisconsin.

¹Some restrictions may apply on leasable auto parts, electronics, or sporting goods. Please check with merchants for details.

²Not all applicants are approved. While no credit history is required, Snap obtains information from consumer reporting agencies in connection with applications, and your score with those agencies may be affected. 

³The default payment plan is the Maximum-Term Plan, which includes 12- to 18-month renewable terms and is your highest cost option. To exercise an early ownership option, including any early buyout promotions, you must make all regular payments on time and ensure the required amount is paid within the applicable timeframe through the customer portal or by contacting Customer Care at 1-877-557-3769. Early buyout promotions may include a cost of lease above the merchandise price. For details and limitations, including relating to applicable early ownership options, refer to your lease agreement.