A new computer, for as low as $24 a month! That might sound like a steal, but — as with any type of financing — make sure you do the math, and research your options.
It may be tempting to buy a new PC in August, particularly with back-to-school sales. Even if you don't need a new laptop for the college classroom, there's the new version of Windows 10 to consider, along with a host of thinner, faster and more powerful machines.
The latest technology can cost you, however. Maybe you don't have $1,000-$2,500 to plunk down on a tricked-out machine. But you probably won't be surprised that many PC sellers will front the money so you can get the gadget of your dreams.
Borrowing money for a new computer can be a challenging, however. There are literally dozens of options, but if you aren't careful, you could end up paying two or three times the value of the machine by the time you're done with payments — and you might be making those payments long after your new machine becomes old and out of date. So here's a look at some laptop financing offers, and how much they can cost you over time.
Crunching the Numbers
At Dell, all purchases come with an offer for Dell financing. Here's one example: An $800 desktop comes with the option "or as low as $24 a month." Take a closer look, using Dell's payment chart, and you'll see that $24 monthly payments mean that $800 PC will take nine years to pay off and ultimately cost $2,170. Why? The interest rate is 29.99%. In another example, a $3,000 PC, with a $90 monthly payment, would take 30 years to pay off and cost $14,734. Pay a little extra each month — just $50 more — and that $3,000 PC will cost $4,886 and be paid off in five years. The mathematics of a minimum payment can be eye-opening. (You can crunch the numbers with this payoff calculator.)
Apple Macbook buyers have two financing options, each with their own drawbacks and benefits. A shopper who picks a $1,200 Macbook Air will also see the message, "From only $57.57 for 24 months." Getting that deal involves applying for PayPal Credit, which comes with a 12.99% interest rate. (Note that if you use PayPal Credit for any other purchases, the rate is 19.99%.) Buyers can pay $57.57 per month for a total of $1,381. Or $210 a month for a total of $1,257. Those terms aren't bad at all, but remember, you'll now have a PayPal Credit account you may or may not want.
Apple's other offer involves opening a Visa credit card offered by Barclays. The benefits are obvious. There's a deferred interest option — you'd have 18 months to pay off the purchase and pay no interest. And you also earn points that can be used toward Apple product purchases. But this offer has a few potential "gotchas." Like most credit cards, the interest rate can range from 13.99% to 26.99% — consumers won't know which rate they'll get until they apply. And if you fail to pay the entire balance within the promotional period, or make a single late payment, all that interest will be applied to your account. In other words, a no-interest deal could quickly cost you $100 or $200 in interest if you don't follow the rules.
Retailers like Best Buy have their own credit deals you can use to fund laptop purchases. Amazon.com offers its own deferred interest plan — 12 months long, if your purchase exceeds $599. The rate on Amazon's card was 25.99% at the end of July.
Finally, you can rent computers, too, or rent to buy them. Rent-A-Center offers many makes and models, and here's how they pencil out. A Toshiba 2-in-1 laptop that's for sale at Best Buy for $249 cost $26 per week (not per month) at Rent-A-Center when I checked. Renters have the option of buying the gadget for a total of 65 payments — $1,689 — or $844 if purchased within 90 days.
How to Decide
Bottom line: As with all credit, it is possible to use funding from Dell, Apple or other sellers and get a decent deal, as long as you pay the loan off early and make much more than the minimum payment. Some people use deferred interest responsibly and it works for them. But know that one payment misstep can cost you a whole lot of money.
A personal loan is another option, but do your research and make sure you understand the terms and can meet the obligation. The same goes for low-interest credit cards. Or, you may be better off using your own credit card if you don't have the cash to buy a computer, and you really need a new one, but the same rules apply there, too. Carry a balance for two or three months? No big deal. Make a habit out of it, and the costs can add up. Keep in mind that these options will require a credit check, and may not be available if you have no or bad credit. You can get a free credit report summary on Credit.com to see where you stand before you apply.
Note: It's important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
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