Lease, or Loan? Key Differences and Benefits

A flat tire, a broken dishwasher, a worn-out mattress – when life happens, we need a way to pay for it.


The most well-known means of paying for big-ticket items is through a loan, either from a bank or charge on a credit card. But if you have bad or no credit, then this means of financing may not be an affordable option. Another way to finance life’s essential items is with a lease-to-own purchase with a 90-day buyout or even longer.


But with such similar descriptions, it’s hard to make the right purchasing decision when we’re not certain of the differences. To help clarify the difference between a lease and a loan, we’ve compared the two and highlighted their strengths while recognizing their weaknesses.



A loan is when you borrow money from an individual, bank, or institution. The key takeaway is that you are given money to use for a variety of uses. This could include buying a physical item like a vehicle or financing major life events like paying medical bills or attending school.



A lease, on the other hand, is tied directly to an item that you can physically take home with you. You simply purchase an item and enter a contract agreement with the seller that while you are not paying the full price tag today, you will be paying the total amount by the end of an agreed time frame.


While similar to a layaway where a retailer takes an object off the sales floor and holds it for a time period until you’ve paid the full amount, a lease is different in that you take the item home the same day you decide to get it.


Pros vs. Cons


The biggest pro of a loan is that it can be used for non-physical items. You also own the item as you’re repaying its costs. But possibly the biggest con is that the interest rates could cause the original loan to inflate to a size you can’t afford to pay back.


Because you’re wanting to borrow a very important item—money—your credit score will be an equally important factor in your eligibility. If you have a history of bad credit or no credit at all, then this can cause a big roadblock to getting financing. They also often require a significant deposit that could be as great as your entire savings account.


Even worse, any loan you do qualify for could come with incredibly high fees that could dwarf any payment toward the original loan amount. This could lead to paying for months or even years longer than you originally intended.


Meanwhile, the greatest benefit of a lease is that you can hang on to your savings and simply make an initial payment on an item that you can then take home that same day. You’re borrowing the item and not the money to finance the item. Think of it as though you’re renting, but then you get to fully own the item once you’ve paid its worth.


This can actually be a great way to furnish life’s essentials items. Because if there’s a problem with the item or a new model, you can swap it for an upgrade with a simple contract update.


A lease will typically include a small fee, which should not be mistaken as the same type of fees involved with a loan. The leasing fee is simply to pay for the services of financing for your take-home-today purchase.


And because you’re not borrowing money, a credit check is not required to sign a lease, regardless if you have bad or no credit. The only history of trust that is needed is proof that you have an income and bank account to afford the lease payments.


Get What You Need Today

Here at Kornerstone Credit, we know how important it is to find uncomplicated financing to pay for when life happens. And we’ll schedule your payments close to your paydays so that you won’t have to worry about fitting it into your budget.


Best of all, our application is so simple to complete by just filling a few fields and taking a picture of your ID or check. You’ll get an almost instant response on whether or not you qualify for up to $5,000.


Call us to fill out an application or find a participating retailer where you can take your financing and get what you need today.



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