Should You Finance the Purchase of a New Laptop?

Whether you’re surfing the internet, playing a game, doing homework, or at the office working, a laptop can be a necessity.

Now:

You may not have enough savings for a new laptop, which you might need immediately for work or study purposes.

To make matters worse, laptops can be expensive, with high-end models costing more than $1,000 and even mid-grade machines costing $500-$800.

You might be tempted to finance the purchase instead of buying the laptop outright. There might even be incentives for financing the machine.

So, should you finance the purchase of a new laptop?

Generally, you should not finance a new laptop.

Find out how retailers usually approach electronic financing, the pros and cons of this type of financing, and the alternatives available to you.

Retailer Financing

Many retailers of expensive electronics offer retailer financing deals.

These deals involve borrowing money directly from the company selling the product to you.

How does it work?

When you go to purchase something that is eligible for retailer financing, the retailer will give you the option of financing your purchase.

Instead of paying for the product, you can sign up for the financing deal.

Usually:

You’ll have to make an initial payment, much like a down payment that you would make on a car or a home.

Once you’ve agreed to the financing deal, you’ll receive monthly bills from the retailer, or the company that the retailer works with the administer retailer financing deals.

Like any other loan, you’ll have to make the payment every month until the loan is paid off.

Typically, retailer financing deals put you on schedule to pay off your debt within 6 to 24 months, but there is variety in the deals available.

Some deals, for example, may let you avoid making any payments for a few months.

Others offer 0% APR deals.

Requires a credit check

One thing to keep in mind is that retailer financing deals do require a credit check.

That means that the retailer will pull a copy of your credit report and look at your credit score before approving you for the financing deal.

Your credit score is a numerical indicator of how trustworthy you are as a borrower.

The higher your credit score, the more likely you are to pay your monthly bills. The lower your score, the more likely you are to make late payments or miss them entirely.

To maintain a good credit score, you’ll want to make sure that you make your monthly bill payments and don’t borrow money when you don’t need to.

If you know you have a poor credit score, or simply know that you have a history of missing payments, don’t rely on consumer financing, as you might not qualify.

Pros

There are a few pros of financing a laptop through the retailer.

Get the laptop now

If you don’t have the money to buy the laptop at full price, financing it gives you time to pay for it later.

If your old laptop breaks or you wind up in a situation where you absolutely need to have a laptop, getting a laptop quickly can be important.

Can be inexpensive

Consumer financing often comes with other enticements or perks -- usually a 0% APR financing offer

For example, you might find a deal where you don’t need to make any payments for the first six months after you buy the laptop. Alternatively, you might get a 0% interest deal where you won’t pay any interest for the loan.

Assuming you make payments before the regular APR kicks in, you avoid the interest charges.

Cons

Financing a laptop through a retailer brings a few downsides as well.

A high APR is lurking

Financing plans that let you avoid paying or offer promotional interest rates often have an expensive catch to them.

For example, 0% interest deals might have a clause where you pay a high rate of interest after the interest-free period expires, plus, all of the interest that would have accrued, unless you pay the loan off before the promotional period ends. That can leave you with a large bill that you didn’t expect.

Another downside is that if the laptop breaks, gets lost, or is stolen, you’ll be left paying the monthly bill for something you don’t even have anymore.

Plus, you’ll have to find a way to get a new laptop, and you probably won’t qualify for a second financing deal while you’re paying for the first one.

Alternatives

There are a few alternatives to consumer financing through a retailer.

Credit cards

One obvious option is to use a credit card. They’re designed to be used to buy something now and pay for it later, right?

In reality, buying something using a credit card when you won’t be able to pay for it in full at the end of the month is a bad idea.

Credit cards charge exorbitant interest rates, so even an inexpensive $500 laptop could cost you more than $800 after interest charges.

The one time that buying a laptop using a credit card makes sense is when you’ll be able to pay the bill in full at the end of the month.

The best part:

You won’t pay any interest and you’ll earn credit card rewards for the purchase.

Large purchases, such as laptops, are great to use when meeting spending requirements to earn a sign-up bonus on a new credit card, so keep that in mind.

Personal loans

Signing up for a personal loan is another way that you can finance a laptop.

Personal loans are flexible financial tools that you can use to borrow money for nearly any purpose.

Unlike a mortgage which must be used to purchase real estate or an auto loan which must be used to purchase a vehicle, personal loans come with very few, or no requirements, on how the money is used.

Many banks offer personal loans and there are many companies dedicated to offering personal loans to consumers. Often, you can go through the entire process online.

The one wrinkle is that many lenders won’t offer personal loans for less than $1,000 or $2,000.

A mid-range laptop will cost less than that amount, so you’ll be restricted in the lenders that you can use if you’re looking to borrow exactly the right amount.

Borrowing more than you need to is generally a bad idea because you’ll have to pay more interest. You might also be tempted to spend the extra money that you borrowed on things that you don’t need.

If you’re looking for a personal loan for another reason, for example, funding a home improvement project, then rolling the cost of a laptop into the loan might not be a bad idea.

However, getting a personal loan solely for a laptop might be difficult.

Should You Finance a Laptop?

Generally speaking, it is a bad idea to finance the purchase of a new laptop.

It doesn't matter if you finance through the retailer or by using a credit card or a personal loan.

The financing plan can easily lead to a debt that you’re not ready to handle.

While a small monthly payment may sound easy to handle, the fact that you have trouble saving up enough money to purchase the laptop means that you’re close to not being able to make that payment.

One financial mishap could lead to you missing payments, which will incur fees and damage your credit.

The other problem is that consumer financing deals often hide things in the fine print.

You might sign up for a deal expecting six months of no payments and no interest. Once those six months end, you’ll find yourself with a massively inflated balance because the promotion was actually a deferred interest deal, and not an interest-free period.

Finally:

Financing a laptop is a bad idea because it fosters bad spending habits.

If you finance a laptop, that could get you used to the idea of buying things now and paying for them later, which is a dangerous mindset to have. You could easily buy more than you can afford without realizing it, only to be stuck with an unmanageable bill.

The better alternative:

Set up a savings plan so that you can pay for the laptop in full a few months down the road.

This helps you build good savings habits, avoid the mindset of borrowing money for everything, and saves you money by helping you avoid interest charges.

Reassess cheaper options

When you cannot afford a brand-new laptop, consider low-tiered laptops that will do the job.

What about used or refurbished laptops?

You could pay for these completely in cash without going into debt -- while you still have a machine for work, study, or personal use.

Conclusion

Financing a laptop can be a tempting thing, especially when you need a new laptop and consumer financing deals are being offered to you right in the store.

Avoiding the temptation to borrow money.

Instead, coming up with a plan to save the money is the better idea, as it helps you avoid all of the pitfalls of retailer financing.