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Interest Free for a year loans
Buyer beware....
How many times have you run into an electronics or furniture store and gotten the "too good to be true" offer of Interest Free for a Year deal? Maybe they even offer no payments for a year. Be careful! Interest free can be a trap in many ways:
First off, don't buy something you can't afford now thinking you will be able to afford it later. That's just not good financial planning. Try to avoid buying anything you can't afford now. Even if you do take advantage of low or no interest, only do this if you can afford the item now. Personally, if I can get a discount rather than the free interest or no payments, I go with that. No potential strings attached and no lurking debt on the horizon.
Second, these interest free deals often have a hidden agenda and it's not to your benefit. Read the small print. In many of the interest free deals, there are penalties for making the last payment late. Even if you're only late by a day, you can get slammed with a whopping interest payment. Often the penalty is that you have to pay interest for the entire time that you thought you were getting that great "interest free". In many cases you will have to pay a penalty, plus as much as 20% or more interest rate for the entire time you were interest free. Not a good deal. This is how a lot of companies actually make money on these deals. They are counting on a certain number of customers messing up and having to pay this large penalty. It's not very customer friendly, but some companies will do it anyway. They may hand the interest free portion over to another financial company of some sort so they're brand doesn't get tainted by any disputes later.
So always read the small print yourself. Ask plenty of questions. And make sure you can afford what you are purchasing, whether it's interest free or not. If you do go ahead and take the no interest deal, be sure to pay all your payments on time. One slip and you may really regret it. Not all interest free deals are bad or sneaky, but it doesn't hurt to be careful.
Note: always consult your professional financial advisor. The advice on this page is just opinion and you should consult a professional before making any financial decisions.
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