Understanding the Meaning of In-House Financing

Q: What is the definition of in-house financing?

In-house financing is when a retailer provides financing to a borrower directly. The borrower repays the loan over time.

Q: What are the differences between in-house financing and personal loans?

With in-house financing, you are working directly with the retailer or business. They give you the loan and you make the purchase. With a personal loan, you work with a bank, credit union, or online lender to receive funds. You can then use those funds for your purchase. Personal loans often come with lower interest rates than in-house financing options.

Q: Can you use a personal loan instead of in-house financing?

Yes, you can. While in-house financing may be offered by a retailer, you can choose to use a personal loan instead to pay for the purchase or service.

Understanding the Meaning of In-House Financing

Lauren WardUpdated February 20, 2025

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent, and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or network providers. Read more about our Editorial Guidelines and How We Make Money.

If you’re purchasing a big-ticket item like furniture or a car, you may be offered in-house financing. In-house financing is provided by a seller directly to customers for a product or service they’re buying. In this guide, we’ll explain how in-house financing works, the pros and cons of using it, and alternative payment methods you may want to consider.

In-House Financing Definition

In-house financing is a form of financing extended directly by a retailer or vendor to a customer for a purchase. The loan is repaid by the customer over time, typically with interest and fees. In-housing financing eliminates the need for a third-party lender, and the approval and application process is typically fast and easy. In-house financing is popular in industries like:

Automotive dealerships for vehicle purchases.
Furniture and appliance retailers for costly household items.
Jewelry stores for high-value pieces.
Healthcare providers for medical procedures like dental work or cosmetic treatments.

How Does In-House Financing Work?

To get in-house financing, borrowers typically complete an application on-site at the business where they are making the purchase for a point-of-sale loan. They need to meet the retailer’s specific eligibility requirements. Once they are approved and loan terms are negotiated, the borrower buys the item with the loan, and then repays the loan in regular installments until the balance is paid off with interest. If any payments are missed, there may be a late payment fee, and the lender might report your late payment to the credit bureaus, which could affect your credit.

Pros of In-House Financing

There are several advantages to using in-house financing, such as:

Easy application process. Because you typically apply in person directly to the seller, approval may be faster than it is with other lenders. Once approved, you can purchase the product you want to buy right away.
You can borrow the exact amount needed. You can borrow just what you need, rather than getting a loan for a bigger amount, which could increase your debt.
Could be an option for borrowers who can’t meet the requirements of traditional lenders. If you have bad credit or you don’t have a strong credit history, you may have an easier time getting approved for in-house financing.

Cons of In-House Financing

There are also drawbacks to in-house financing that you’ll want to consider, including:

There may be higher interest and fees. In-house financing might come with higher rates and fees than other lending options.
A large down payment may be needed. If you have bad credit, the seller may require you to make a larger down payment.
There could be limitations on your purchase options. You can only get in-house financing for the products sold by that seller, limiting you to what they have in stock.

Applying for In-House Financing

Applying for in-house financing is simple. All you do is:

Complete the application.
Provide any necessary supporting documents, such as your ID, proof of employment, proof of residence, and proof of income.
If approved, go over the loan terms, and sign the loan agreement.

Alternatives to In-House Financing

If you decide that in-house financing isn’t right for you, there are a number of other options you can consider.

Personal Loans

Many people use personal loans for borrowing money. With a personal loan, a bank, online lender, or credit union lends you a lump sum that you repay with interest in installments over time.Having strong credit can help your personal loan approval odds and can also help you qualify for favorable rates and terms. Once you’re approved for a personal loan, you may expect to receive funds quickly. Personal loans are flexible and can be used for almost any purpose, including:

Home improvements: Funding renovations or repairs.
Medical expenses: Covering unexpected or planned medical procedures.
Wedding or event costs: Financing large life events, such as weddings.
Vacations: Funding travel and leisure plans.
Emergencies: Handling urgent or unplanned expenses.
Moving costs: Covering relocation and associated fees.
Car repairs: Paying for unexpected vehicle maintenance or repairs.

Family Loans

With a family loan, a relative lends you the money necessary to make a large purchase. Because you are not working through a traditional lender, the interest rate and loan terms can be whatever you and your relative agree upon. Be sure to put all the terms, including the payment schedule and interest being charged, in writing. This is called a promissory note, and it’s basically a legally-binding IOU.Keep in mind that family loans can place a strain on relationships. If there’s a chance you may not be able to make the repayments, you may want to consider another financing option. Recommended: Need to Borrow Money? 9 Ways to Consider

Credit Cards

Using a credit card to make your purchase is quick and easy. You may be able to put the expense on a rewards credit card and earn points or miles you can later redeem. Or, if you have good credit, you might qualify for a credit card with an introductory 0% APR. As long as you pay off the balance on the card before the introductory period ends, you won’t owe interest.However, if you can’t pay off the amount fully, you could end up paying more in interest than you would have with other financing methods. That’s because credit cards typically come with high interest rates.

Buy Now, Pay Later

With buy now, pay later, you purchase the item right away, make one upfront payment, and then pay for the remainder in fixed equal installments over time. Generally, you need to pay off the purchase in full within several weeks or months, although plans may differ. Buy now, pay later plans might come with interest and fees, and not all purchases are eligible for this form of financing.

Personal Loans vs In-House Financing

If you’re trying to decide between a personal loan and in-house financing, it may help to compare the two.

Similarities

Both lending options allow you to purchase the item and pay for it over time.
Your credit score and history affect your interest rate for personal loans and in-house financing.

Differences

A personal loan is flexible. You can shop at different retailers and choose the exact item you want, rather than be limited to one retailer.
Personal loans may have lower interest rates and fees.

Using a Personal Loan Instead of In-House Financing

While they have pros and cons like other lending options do, personal loans are not bad. In fact, they may have better interest rates and lower fees than in-house financing options. Personal loans are also flexible and can be used for almost any purpose.In addition, many personal loan lenders may be able to offer same day financing just like in-house retailers do, which means you may get the loan just as fast and perhaps at a better rate than you would if you had chosen in-house financing. You can apply for a personal loan online, which can make it easy and convenient.

Personal Loans With Lantern

If you’re shopping for a personal loan, Lantern by SoFi can help. By filling out one simple form, you can get offers from multiple lenders at once and compare personal loan interest rates and terms to find the best option for your needs. Find and compare personal loan options with Lantern.

Frequently Asked Questions

What is the definition of in-house financing?

What are the differences between in-house financing and personal loans?

Can you use a personal loan instead of in-house financing?

Photo credit: iStock/FG Trade

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About the Author

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.

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