IKEA is offering a new financing option closer in style to popular buy now, pay later schemes.
The new payment option lets shoppers spread the cost of buying new furniture without paying interest.Shoppers at Ikea can use a new finance option[/caption]
Ikea has simplified its financing options and the new loan can be used for lower amounts and repaid over a shorter period of time.
The Swedish furniture giant now offers one option for in-store and online: an interest-free loan on purchases starting from £99.
Money can be paid back between three months and four years, and the exact period will depend on how much you borrow.
Shoppers can apply online, either via the Ikea website or by downloading the Ikea Finance app, and a decision is instant unless more checks are needed.
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Ikea previously offered a range of options for spreading the cost of purchases, including a loan with interest and interest-free credit in stores.
The minimum period for paying the money back was 12 months and you had to spend at least £300.
The shake up brings it closer to buy now, pay later schemes, which let shoppers spread repayments for smaller purchases over shorter periods and usually with zero interest.
The new option is a loan and includes credit checks, whereas buy now, pay later providers don’t do this.
The loan can also still be used to spread payments on larger amounts up to £15,000, and over a longer period if needed.
Most buy now, pay later providers let you spread the cost over months rather than years, and for purchases worth £100s rather than £1,000s.
Ikea said the new finance option will “make applying for financial support more accessible and convenient for all customers”.
Compare your borrowing options
There may be better options for borrowing and experts advise that shoppers check before they buy so they get the best deal.
Rachel Springall, a finance expert at Moneyfacts, said: “Consumers with little to no disposable income and are unable to pay for goods upfront may turn to the convenience of a finance option, but it’s important they consider other forms of borrowing too.”
Credit cards may offer zero interest and more flexible repayment options, she said, and there are also loans from other providers which could work out better.
Ms Springall said: “A credit card may be attractive choice, as not only can consumers adjust their monthly repayments, but they could get a 0% purchase card for up to 21 months interest-free with Lloyds Bank.
“Or they could move their borrowing on an existing credit card to a 0% balance transfer card to spread the cost for up to 29 months with a fee of 2.69% with MBNA Limited.
“Those consumers who want to consolidate debts and need a set repayment plan may wish to consider an unsecured personal loan where rates can be as low as 2.8%.”
But she warned that borrowing money via an overdraft was unlikely to be a better option, as rates can be high.
She said: “One form of borrowing to avoid is using an overdraft, unless they have an ability to pay the debt off soon, it can be rather expensive as some overdrafts charge nearly 40% APR.”
How does Ikea’s new financing option work?
You can take out a loan for purchases between £99 and £15,000 and the repayments can be spread over time – between 3, 10, 24, 36, 48 months.
Your options will depend on how much you borrow.
You won’t pay any interest and you can apply for the loan when shopping in store or online and when buying any Ikea products, except food.
The loan can include the cost of delivery and kitchen installation too.
To be eligible, you need to be over 18, have valid photo ID (a full driving licence or passport).
How much can I borrow?
IKEA'S loan can cover purchases between £99 and £15,000 with repayments over three months to four years, if you're eligible.
- Between £99 – £299 – 3 months
- Between £300 – £599 – 3 or 6 months
- Between £600 – £1,199 -3, 6 or 10 months
- Between £1,200 – £2,999 -6, 10 or 24 months
- Between £3,000 – £4,999 -10, 24 or 36 months
- From £5,000 and above -24, 36 or 48 months
You’ll need to provide your home address for the past two years and employment status.
You can apply online or with the IKEA Finance app and you’ll need to take advantage of the loan within 90 days of applying.
A decision is instant, unless your application needs more checks and then you’ll be contacted within three working days.
There’s a “soft” credit search to establish your eligibility before a full application, and this won’t affect your credit score.
But a full credit check is done after submitting your application and this will be flagged when you get to this point during the process.
There’s a £12 fee for a missed payment and anyone struggling to keep up with repayments should contact Ikano Bank, where their customer service can help .
What finance did Ikea offer before?
Previously, Ikea offered interest-free credit of 12, 24 or 36 months on purchases of over £600, or over £250 in some stores for a limited time as a special offer. This was only available in stores.
It also offered loans with repayments spread across 12, 24, 36, 48 or 60 months, starting from £300, but this came with an interest rate of 7.9%. Again, this was only in stores.
Ikea also offered the option to pay with Paypal credit for online shopping. This offered interest-free credit over four months on purchases of more than £99.
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