What is an IKEA financial services loan and how does it work?

In 2021, IKEA has expanded its financing options, including an IKEA Finance Services loan. This deferred payment option is available for smaller budgets and is significantly more flexible than previous financing options.

Interested? Let’s take a look at how it works, what’s required to qualify, and what’s the catch with this new payment system.

What is an IKEA Finance Services loan?

If you’re a fan of the Swedish retail giant, then you’ll be pleased to know that IKEA has introduced interest-free financing on its financial products.

IKEA Finance Services credit is available on purchases between £99 and £15,000. Repayment can be spread over periods ranging from three months to four years. And the best part is that the deferred payment scheme is interest-free.

In other words, buyers can pay for their furniture purchase over a period of time without incurring any interest, making remodeling projects more affordable.

How does this work?

You can apply for an IKEA Finance Services loan in store, online or by downloading the IKEA Finance App.

The amount you borrow will determine the length of the loan. As of November 2024, the current payment duration periods are:

• £99 to £1,199 – 3 months
• From £99 to £2.9998 – 6 months
• £300 to £4,499 – 10 months
• £600 to £4,499 – 18 months
• From £3000 to £15000 – 30 months
• From £5,000 to £15,000 – 48 months

The maximum amount you can borrow is £15,000.

Although this service has many similarities to a Buy Now Pay Later scheme, it is essentially a loan. The loan was provided by Ikano Bank, with IKEA acting as an intermediary broker. You will therefore need to provide proof of employment status, a valid driving license with full photograph or a valid UK passport, and proof of a UK address for the last two years. You will also have to undergo a credit score check to ensure that you are eligible for the loan.

What are the benefits?

IKEA has always offered customers multiple financing options. Buying a home can be quite expensive, especially when renovating multiple rooms. So, to increase affordability, the retailer has offered a range of payment solutions to spread the cost of purchases over time, using interest-bearing loans and interest-free in-store credit.

However, these older solutions were quite rigid and required a minimum outlay of £300 with a minimum repayment schedule of 12 months.

The new IKEA Finance Services loan is much more flexible. The minimum spend has been reduced to £99 and the repayment period can extend from a few months to a few years. In this way, the barriers to entry for customers were lowered, which helped grow IKEA’s business while supporting consumers – a win-win situation.

It works much more like PayPal loan or Klarna, giving customers the ability to borrow as much as they need while maintaining a flexible repayment schedule. If you buy a larger ticket, you can borrow more and spread the cost over a longer period of time.

However, the biggest benefit is that any amount borrowed through the IKEA Finance Services scheme is interest-free. As long as buyers make scheduled payments, they will not pay interest.

Is there a catch?

There are a few things that buyers should take into account. First, this new payment method is subject to availability. So you can be met “Unfortunately, we are not accepting applications at this time.” error. In other words, there is no guarantee that these loans will be available when you need them. Alternatively, only a certain amount of credit will be offered, which may be less than expected.

Additionally, as mentioned earlier, buyers will have to undergo a full credit check when applying for a loan. This will show up on your credit score, and if the loan is rejected, it can hurt your credit score.

You must also be at least 18 years old to apply. It’s also important to remember that this credit essentially acts as a form of store credit. This means that it can only be used for purchases at IKEA and not at other similar stores. If you plan to purchase items from multiple retailers, a 0% discount shopping card may be more suitable.

The good news is that you can check in advance whether you’re eligible for a 0% rebate purchase card using tools like the credit card eligibility checker. This is usually a smart idea before you apply for an IKEA Finance Services loan, as it can identify any problems with your credit and give you a chance to fix them before you apply. This way, the risk of rejection is minimized and your credit rating is better protected.

Does IKEA allow monthly payments?

Yes. Depending on the loan amount and the length of the loan, you will be required to repay a certain amount each month. IKEA has provided a monthly payment calculation tool that customers can use before applying.

For example, someone borrowing £99 for three months would have to repay £33 every month. It is important to note that failure to adhere to the payment schedule may result in late fees, which can significantly increase the cost of repaying the loan.

What credit score do you need to qualify for a loan with IKEA Finance Services?

IKEA Finance Services loan applications in the UK are processed by Ikano Bank. Subject to these requirements, anyone with a “good” credit rating is eligible to participate. However, those with lower scores may still be eligible if they have a good credit history.

However, there are some situations that, regardless of credit score, will disqualify an applicant. These include:

• You have a credit history that includes a loan default, an Individual Voluntary Arrangement (IVA), a Debt Relief Order (DRO) or a recent County Court Judgment (CCJ).
• You have a valid power of attorney.
• The application is submitted using a business account or joint bank account, which requires two signatures.
• You previously declared bankruptcy.