What Does “Same as Cash” Mean?

Chances are you’ve come across same-as-cash financing before. 

Home service providers, contractors, and furniture stores often offer this type of financing, and it often promises no interest for a set period, such as three or six months. No interest sounds excellent, but borrowers should be aware of a crucial catch before they take a same-as-cash offer. 

Here’s what to know about these offers, how they work, and their drawbacks. 

In this guide:

• What does “same as cash” mean?
• What same-as-cash payments might look like
• Pros and cons of same-as-cash financing
• Should you take a same-as-cash financing offer?
• Alternatives to same-as-cash financing
• FAQ

What does “same as cash” mean?

Same-as-cash offers are special offers from retailers and contractors. On the surface, these offers—aka point-of-sale loans—promise no interest for a fixed period. You don’t pay interest during that period, but interest accrues on your balance. 

The way credit card interest works, interest compounds—often daily. So if you fail to repay the balance before your deferred-interest period ends, you’ll end up with back-interest charges. These costs can add up and make paying off your total balance more difficult.

Imagine you opted to finance a $4,000 sectional sofa, but you were only able to repay $2,000 total before the six-month deferred interest period ended. 

Example only
Amount financed	$4,000
Same-as-cash term	6 months
Amount repaid during same-as-cash term	$2,000
Remaining balance	$2,000
Interest rate after same-as-cash term	22%

After six months, the regular interest rate of 22% kicks in—plus you now owe back interest on the total monthly balances during the deferred interest period. You could end up paying several hundred dollars in back interest on that amount.

You might get a same-as-cash financing offer if you buy a new couch or replace your water heater. The financing may be in-house or through the retailer or contractor, but certain companies may also have financing partners. 

This type of financing is often available to a range of borrowers, including those with limited or poor credit, but companies may have different rules about who can qualify.

What same-as-cash payments might look like

Let’s revisit our example of financing your $4,000 sectional sofa from a local furniture store. This same-as-cash offer comes with a six-month deferred interest period. If you wanted to repay your total balance within six months, your monthly payments would be around $667. 

If your balance remained around $4,000 for the deferred interest period, and the regular rate of 22% kicked in, interest would likely get expensive. 

For instance, let’s say you opted to make $200 monthly payments once the regular rate is applied. It would take around 25 months to repay your balance, and you’d pay a total of $926 in interest charges—not including back interest that accrued during your deferred-interest period. 

Pros and cons of same-as-cash financing

Should you take a same-as-cash financing offer?

Taking a same-as-cash offer could make sense if you can afford to repay your balance before the deferred-interest period expires. This type of financing can be helpful because it lets you repay a significant balance in smaller amounts over a set time. Just be sure to start repaying it right away. Waiting could result in high interest charges in the future. 

Alternatives to same-as-cash financing

Same-as-cash financing may not be the right option if you don’t think you can repay your balance in full by the end of the deferred interest period. You could end up with hefty interest charges due to the back interest on your balance. 

Lower-interest alternative financing options might include:

• Home equity line of credit (HELOC): With a HELOC, you draw from a credit line against your home equity. As of September 2022, our research found the lowest HELOC rates were around 5.63%.
• Home equity loan: Home equity loans are disbursed as a lump sum, not a credit line. Like HELOCs, these loans tend to have lower interest rates than same-as-cash financing, with the lowest rates around 5.11% in September 2022. 
• Personal loan: Many personal loans are disbursed quickly, and loan amounts range from $250 to $50,000 or more. In March 2023, the Federal Reserve reported two-year personal loans had an average rate of 11.22%.
• 0% APR credit card: These credit cards work similarly to same-as-cash financing, but they may offer longer deferred interest periods, such as 12 or 18 months. Still, a 0% APR card tends to be desirable only if you can repay your entire balance before the end of the no-interest period. 

FAQ

Does “same as cash” mean no interest?

“Same as cash” doesn’t mean no interest. With same-as-cash financing, you may not pay interest for a set period, but interest still accrues on your balance. If you don’t repay it within a specific time frame, you could end up paying back interest on your total monthly balances during the deferred interest period. 

What is the catch with same-as-cash financing?

The catch with same-as-cash financing is that interest accrues on your balance during the deferred-interest period. So if you don’t repay your total balance by the end of that period, you could end up with sky-high interest charges. 

Should I take a same-as-cash offer if I can’t pay it off in full in the allotted time?

If you can’t pay off your balance by the end of your deferred interest period, same-as-cash financing may not be your best option. 

You may consider paying cash, taking out a home equity line of credit, home equity loan, or personal loan. These financing options often have lower interest rates than credit cards. 

How does same-as-cash financing affect your credit?

When you apply for same-as-cash financing, you’ll undergo a hard credit check. This check can hurt your credit score by a few points. But if you make on-time monthly payments, ideally repaying your balance before the deferred-interest period ends, it could improve your credit score.

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