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In-store financing can lead to unforeseen headache

It sounds good, but you need to make sure you understand what you're signing up for.

MACON, Ga. — The pandemic has forced a lot of us to spend a lot more time at home, and you may be getting sick of your furniture.

While it's tempting go out and buy a new sofa or chair, how you pay for it could cost more than you think. You've probably heard of it -- in-store financing that's interest-free. It sounds good, but you need to make sure you understand what you're signing up for.

Who doesn't love new furniture? But it's expensive. One option might be to finance it through a store, but first, let's do the math. Say you buy a $3,000 couch interest-free for 12 months. Financial advisor Sherri Goss says if you owe just $1 when the 12 months are up, you'll end up owing $750 in interest and furniture stores can charge up to almost 30 percent interest.

"On top of this problem, you now owe interest on top of the interest you owe, so if you can't pay off that $750 you owe that month, you're going to start paying almost 30 percent interest going forward. You do not want to be in that situation," says Goss.

In-store, interest-free financing sounds enticing, but it can be financially dangerous.

Goss says, "It would be extremely easy to overextend yourself financially if you know you just have to make these low payments for years or whatever, so I think it's not a great thing."

If you can afford payments, such as $200 a month, you can always save up that money and then go shopping. If you decide to go with in-store financing, before you apply, make sure the retailer is going to report your payments to the credit bureaus, which will help improve your credit.