You have found yourself in the position of wanting or needing to make a large purchase. While the price tag may seem painful, paying for it doesn’t necessarily have to be a big pain in the wallet. Following these tips on how to finance a major purchase responsibly may help spare you the financial headaches that often accompany paying for high priced purchases.

Finance Less if You Can

Paying cash can have its advantages: When paying with cash you are avoiding paying interest on your purchases. But unexpected expenses and emergencies happen. Be prepared by starting an emergency fund contribution to your monthly budget to cover significant one-time surprise expenses.

Rate Shop for Credit Cards

When paying cash isn’t an option, step one is planning the most sensible and affordable way to minimize the debt you may accumulate by having to finance a large purchase. Before financing high-ticket items on credit cards, compare your current credit cards’ APRs for purchases. Each card you carry may have a different APR for purchases and you may find that one is significantly lower than the others. The key to obtaining low interest rate credit cards is a having strong credit history. Every percentage point counts, and costs when it comes to carrying credit card debt — another reason to make your credit card payments on time and in full every month, to help maintain a solid credit history.

Rate Shop for Loans

When applying for large loans, try to ensure that your credit score doesn’t take a hit. When rate shopping for loans or any line of credit, potential creditors will want to pull your credit report, which can result in a hard inquiry; these types of inquiries can impact credit scores. Soft inquiries, which involve pulling your own credit or your current lenders checking your credit to reassess your account, do not affect credit scores. The goal when rate shopping is to get the lowest rate while keeping hard inquiries to a minimum.

Similar loan applications for the same amount are usually considered to be one inquiry within a limited period of time.  For example, if you check rates with a number of mortgage lenders within a month, the resulting multiple hard inquiries may be considered as one. Here is more insightful advice from NerdWallet for a better understanding of how to rate shop without having too much of an impact on your credit score.

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Now that you’ve learned more about financing major purchases responsibly, remember to fully think through whether the big purchase you’re considering is a good idea in the first place. Before you buy big, answer these 4 questions from WiseBread.

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