Personal financing - what you need to know

Feb 21, 2021
Life happens. When the dishwasher breaks down or your car dies, you may be faced with an unplanned expense. Sadly, most people don’t have the money to cover a large purchase on short notice. According to a September 2020 survey by The Consumer Financial Protection Bureau (CFPB), more than half of Americans feel unprepared for financial emergencies.

Financing gives consumers a way to cover unexpected expenses by paying over time instead of a lump sum payment now. Financing may be the answer to your dilemma, but there are some important things to understand before deciding if this is the right option for you.

For most people, the decision to finance an item is based on the ability to pay for the item at the time of purchase. There’s nothing wrong with financing but be sure you check into all the options available and any extra fees or charges associated with them.

If you’re struggling to make the monthly minimum payment on your current credit cards, it’s probably not wise to add another big-ticket item to your list. Look at your budget and see what you can do to pay something off before you take on more debt.

Now that you’ve decided to finance your purchase, what kind of financing options do you have? There are more than you might think, but they can be separated into two main categories:  Traditional and Non-Traditional.

This type of financing is most common and the most utilized by consumers. Traditional financing is typically through established financial institutions and available for those with good credit history.

Bank loan

Banks and credit unions offer loans and credit lines for large and medium-sized purchases. The process can be lengthy, so give yourself plenty of time to complete the application and provide additional information regarding your income, assets, and debts. If you have a good or very good credit score, your chances of approval are higher.

Credit & store cards

You can purchase an item on a major credit card or apply for in-store credit. Interest rates are higher than bank loans but not as high as other options might be. You will need an established credit history and a decent credit score to qualify.

This type of financing offers an alternative for consumers with poor credit, bankruptcy or no credit history. There are still options for those with credit issues. Lenders are willing to extend credit, but the tradeoff is typically in the interest rates and terms.

Payday loan

Payday loans are another option if you need money fast. Money is available quickly, with just proof of income. Interest rates can be extremely high. Some payday lenders charge interest rates over 300%.


Lease-to-own companies offer financing but with more reasonable rates. If you need home appliances, furniture, electronics, or other large items for your home or apartment, it might be an option. Many companies will approve a wide range of credit scores but may charge you a higher rate if your credit is poor.

Online financing

Online financing companies often offer better rates to people with less than perfect credit ratings or no credit history. Companies like Snap Finance help people with lower credit scores improve their credit history by financing at higher rates than a bank loan, but more affordable than a payday loan company. Do a little research before signing a loan to make sure you get the best rate available to you.

Sometimes out-of-the-box ideas can help when you’re in a financial pinch.

Personal loan

You can ask a friend or family member for a personal loan. You might know someone willing to loan you money in an emergency or for a short period of time. If this is the best option for you, make sure that all details of the arrangement are clearly spelled out for both parties to avoid misunderstandings. Don’t take the loan if you can’t afford to pay it back. A relationship, with friends or family, isn’t worth ruining over money.

Finding the right financing option is based on your individual situation. Spending a little time researching before making a purchase can have a big impact on your financial health in the long run. Be watchful of fees, additional finance charges, and any discounts or rewards available to you. The time will be well worth it. So, when life happens, you can tackle the emergency with confidence knowing there are helpful options out there.

The content of this article is for informational purposes only and should not be construed as personalized legal, financial, or other advice. This article represents paid promotional material provided by or on behalf of Snap Finance, LLC, or its affiliates.