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How to Best Finance a Major Purchase

13.10.2019 by Jack H

Man empty wallet how to finance a purchase

There are many things that cannot simply be purchased on a whim. In fact, it is often better to save up for better quality products that will last you longer and work better in the long run. Though they come with a hefty price tag, the reality is that they will cost less than a cheaper alternative that you need to buy again and again.

Investing in your home and in your life is how you can lead a better one. It is how you can enjoy a more luxurious lifestyle without the paycheck that it usually takes. Yes, you will need to save up in advance or opt for a financing option, but when the quality of life you lead improves drastically, it is always worth it.

There are so many things that you can and should finance. Typical purchases like a car, home, or large appliances, yes, but also items that would really benefit your lifestyle. If you are someone who enjoys cooking, for example, investing in professional-grade equipment can help you take your passion to new heights and last you a lifetime.

You don’t have to only buy the necessities with financing. You can invest in your passions just as easily, but only if you follow this guide on how to finance a major purchase in advance:

Things to Consider Before You Start Financing

Financing can feel like such a mountainous task that we often forget to do our due diligence. That is why before you ever buy or start to finance (especially if it is through a loan) you will want to ask yourself these key questions.

How Soon Can You Realistically Pay It Off?

Though you can possibly pay it off fast, you still need to account for daily living expenses. Never put yourself in debt, trying to finance a major purchase. Always budget for it so that you can comfortably make your repayments, even if it takes longer.

Are There Cheaper Alternatives?

Before you buy, ask yourself if there is an option that is better for your budget? Though luxury items tend to cost more than cheap items that are meant to break, that doesn’t mean you automatically have to go for the most expensive option. Shop around and compare items so that you can know for a fact you have the best for value choice on your hands.

Are there Better Days to Buy?

Many brands and industries offer sales. The only real exception in most cases are houses, which increase and decrease in value depending on the housing market. If you can wait to buy, see about waiting for the item to go on sale. Alternatives to this suggestion are to go at the end of the financial quarter or the end of the financial year. This option is great when you deal with salespeople, who need to increase their quotas and are more likely to be receptive to negotiation.

Can You Negotiate?

If the product is being sold by a salesperson and not run up with a machine, chances are you can and should negotiate the price down. This is ideal for big purchases like cars. When negotiating, however, you will need to know what a decent selling price is and be prepared to walk away.

Do You Have a Back-Up Plan?

Do you have a back-up plan if, say, you lose your job? You need to know how you plan on repaying these debts even in cases where you no longer have an income. A great starting place is to start saving up for an emergency fund. This fund should cover all your fixed expenses and living expenses for at least three months. If you cannot wait to save this up, get confirmation that a family member or even friend can cover for you.

The final option is to take out a loan that allows you to consolidate your debt. Though you will still need to repay, you will only have one payment to make a month instead of several.

How to Finance a Major Purchase

Now that you have gone through that checklist and have checked that the item you are buying is the best value and that you can indeed afford it, you will want to go through these steps to best finance a major purchase:

Saving Up for The Down Deposit

It is generally best to save up at least 30% of the price for the down deposit. This is often the standard price, though in some cases (like with cars) you can pay a lower down deposit in exchange for a higher interest rate and higher repayment deposits.

Don’t Commit to Anything Out of Your Budget

While you are budgeting, you should forget about anything that is out of your budget. Though financing can be a great way to afford things that are normally out of our paycheck’s reach, that doesn’t mean you should put yourself into debt with repayments you cannot easily or comfortably make back.

What to Do If You Need Money Now

Saving up for the down deposit is not always an option. If you need to make a major purchase due to an emergency, this can cripple you. Thankfully there are plenty of options out there to help you finance a big, unexpected purchase.

Take a Loan Out On Your Vehicle

Taking out a loan on your vehicle is a great choice if you own your car or even motorcycle outright. The reason why this is such a great option is that you have something that can be used as collateral. Unlike traditional collateral, which might be stored away, a loan on your car doesn’t mean you have to give it up. You can still use it just as you normally have so long as you continue to make repayments and have your insurance.

Since there is collateral, the interest rate on this type of loan is significantly less, even if you have bad credit.

Take Out a Short Term Loan

There are so many places that you can take out a short-term loan. If you have a good credit score, you can simply look online and see what lenders are out there. If you have a bad credit score, however, you will need to be more careful. You don’t want to be preyed upon since only a few lenders will take you on and loan you money.

Borrow From Friends or Family

There is no shame in asking for help from friends or family. Do try to save this option for things you desperately need. For example, if your fridge broke down and you need another one. Everyone needs a fridge to store their food, and therefore your friends or family will be more willing to help pitch in to get you a new one.

Don’t start this process, however, without first writing down the agreement. This way, everyone is protected legally.

Get an Advance from Your Employer

If the major purchase you are looking to get would directly benefit your performance at work get in touch with your employer or manager. They might be willing to buy the item for you, or at the very least be there to help. A great example of how they can help is by giving you a pay advance.

Take a Higher Repayment Option

If you absolutely need to, you can opt for the lower down deposit in exchange for a higher repayment plan. Never do this if you cannot comfortably afford the repayments.

Crowd Funding

In some rare cases, you might actually be able to finance your major purchase by crowdfunding. This is best done for social events or for goodwill cases, so don’t be surprised if people fund your community BBQ idea over funding a new couch for your downstairs TV room.

Always Try to Repay Faster

If you get a pay rise, see about refinancing your loan. If you are struggling with multiple debts, consider consolidating them.

Refinance Your Loan

Refinance your loan when you have enough per month to pay a higher rate. This will reduce the amount you pay back overall.

Consolidate Your Loans

Consolidating loans means you take out one big loan that will instantly pay off all of your other debts. You can then make repayments to one person and have better control over how much you pay back every month or week.


It can be tempting to opt for whatever is cheapest, but you need to consider the long run when making purchases. Knowing how to finance and afford bigger, more luxury items is a great tool to have. That way, you can budget in a long-lasting product that will give back in more ways than one.

Whether you need to finance a car or want to invest in a new stove that isn’t 20 years old. With the right budget sense and financing knowledge, you can afford more than you realize. Some things might take longer to save up for, and others might sneak up on you unexpectedly. By improving your credit score, savings, and knowing where to turn to for financing options, you can accommodate any major purchase.