Should you Finance a Guitar? - Is Finance Good or Bad!
You may see that a lot of music retailers and shop are offering Finance on their purchases now. We hear a lot of people asking if this is a good idea? Should you borrow money to buy an instrument? Well, yes and no! There are good points and bad points about financing. So we thought we would go over it all allowing you to make a Clearer decision on if you should finance your new guitar.
Please remember we are not financial advisors, we are talking about our own experiences, what we have learnt and discovered from it, If you are after professional advice please seek out a legal expert. Saying that, let us get straight into it.
Let us Start with the Bad:
Let us start with the bad. They aren’t bad per se but the thing you need to consider before borrowing money. The biggest one to keep in mind is that you are borrowing money. You are taking out credit. Which means it goes on your credit history. This isn’t “bad” in itself but if you are looking to take out a loan or a mortgage then it will be on your record that you “owe money” and may affect your load amount or the result. This Varys depending on your income, salary and outgoings but it is something to think about.
The next point to remember is that due to the way finance companies make money, you may end up paying more for your guitar than you wanted to. This is due to something called “APR” (Annual Percentage Rate). This number is how much you will effectively be charged to borrow the money, it is more complicated than that, but for this article, we will just say it is the cost of borrowing the money. As a rule of thumb, you want this number to be as low as possible. You can’t get 0% finance and we will cover them later.
One more thing to note:
If the apr is above 0, this means you will end up paying more for the guitar than what it costs. For example, if you bought a guitar that cost £1000, and you financed it with a loan of 15% APR over 1 year, you would end up paying around £1078 back. This means you have paid more of the guitar than it was actually up for sale for. So keep this in mind and check interest rates and term length, If we use the example above and do it over 2 years, you will end up paying £1,153 back. There are lots of good deals but also lots of bad deals, Look for a short term and a low-interest rate.
The next point to make is the repayments, you will have x amount to pay a month for y number of years. Which you are contracted to pay, Failing to pay a payment will go on your credit score and could end up with you having to give the guitar back to pay off the loan. I understand this all sounds very scary, but as long as you buy within your means, you should be fine. Don’t overstretch yourself.
Let us Move onto the Good
Now, it’s not all bad news, there are some amazing points about financing guitars that make it a no brainer. The biggest one is that your dream guitar can become a lot more affordable. That £3000 Gibson is suddenly more affordable when split up into monthly payments. Let us say you plan to buy a Les Paul Custom shop and never plan to sell it or get rid of it, why shouldn’t you finance it? If you plan to hold on to it forever why not free up the bank account and finance and not have the full amount come out your bank account at once.
The last point is that the guitar might be worth more when you have finished the finance. If it is something like a rare Gibson or Fender then there is a chance it will increase in value. Which in turn will help lower the payments of the finance.
Most custom shop guitar builder offer finance, with little or zero deposit. Making it even easier and cheaper to get a custom-built guitar. Our good friend over at LT Custom Guitars has some amazing deals for his builds (If you haven’t checked out our review on his newest model you can read it here).
Something To Remember:
A lot of retailers will offer 0% finance, What this means is that you don’t pay anything to borrow the money. So you only borrow the cost of the guitar. This is a no brainer, as you are just splitting the cost of the instrument over 12, 24 or 36 months. Which is perfect. Plus, as mentioned above, if the guitar is rare or limited, by the time you have finished paying it off. It might be worth more. Making a tidy investment. However, you will have to do some research before purchasing.
So, what do we say should you finance a guitar? Well, it all depends on 2 things, Can you afford the repayments and what is the APR? Finance is all a numbers game. You will find that different shops and retailers will give you different prices and also different rate and terms. Finance is a very competitive market, so you can also pitch deals against other shops for better deals.
At the end of the day we can’t tell you how to spend your money, but just be wise and don’t rush into anything. Finance is a great way to get your dream guitar at low monthly payments. However, it is also a way to overpay for a depreciating guitar. So chose wisely. Whatever you chose to do, consider your options, shop around and find some deals and most importantly, which ever way you go for, be sure you can afford it! This is the most important aspect.
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