Zero Int Loans

Everything You Need to Know About 0 Interest Loans

What are 0 interest loans?

As the name suggests, 0 interest loans are loans that are offered by banks and companies such that the only money that needs to be paid at the end of the loan is the principal.

A 0 interest loan is one that lets you make your desired purchases at no interest. With 0 interest loans, you only have to find out your monthly payments by dividing the principal by the number of months for which you are borrowing the money. The tenure may be adjusted depending on your needs.

The question now arises, why would a company offer customers a 0 interest loan? The answer is simple. It encourages customers to spend money on their product by making it more attractive.

In an ideal situation, this allows the manufacturer to capture the market and also gives the customer a good product at a reasonable price which translates to a win-win for both parties.

Where can I get 0 interest loans?

0 interest loans are offered more frequently than you would think. Many retailers can provide you with a 0 interest loan. Some common avenues for these types of loans are:

Furniture and electronics retailers

When it comes to buying a new sofa or a new TV, retailers are more than willing to offer you great deals on no-interest loans. This is an excellent plan for both retailers and customers. Everyone benefits, provided payments are made on time.

Medical Providers

If your medical provider supports the scheme, some banks give no-interest loans on medical care.

Car Dealers

If you have an excellent credit score, some car dealers may go so far as to offer you a 0 interest loan when you purchase a new car. These loans are offered during a promotional period. This means that the entire loan isn’t interest-free. It only means that you do not have to pay interest during a specific period. Sometimes taking a 0 interest loan can mean that you have to sacrifice other perks offered by the manufacturer. Therefore, these loans might not be the best and most beneficial to the customer.

Hidden Costs of 0 interest Loans

A 0 interest loan is fantastic if you can make payments as per schedule. However, if you happen to miss even one payment, the penalties can be very harsh. In some cases, the customer may end up having to pay more on a 0 interest loan than on a personal loan.

Here are some of the ways that banks can introduce hidden charges into 0 interest loans.

Retroactive Charges:

This kind of charge is one of the harshest penalties that banks that offer 0 interest loans can give. Under these charges, customers who cannot pay off the loan amount by the stipulated date are required to pay all the interest accrued on the loan since the first day of the loan. Depending on how the loan has been financed, the charges can prove to be significant.

Technicalities

To get a 0 interest loan without hassle, customers need to be aware. Buried in the fine print of these loans can be anything from retroactive charges to substantial penalties. One delayed payment is enough to force you to make interest and penalty payments.

High-Interest Rates

Most 0 interest loans are structured that way only for a promotional period. After this period ends and interest rates kick in, the interest charges can sometimes be even greater than 20%. A borrower might assume that they have no payments to make. If they miss a single deadline, they will come to realize how expensive the loan really is.

Surprise Charges

Most 0 interest loans have charges that are not immediately visible to the customer. These charges like processing charges, application charges, cancellation charges are buried deep in the fine print of these loans. If you are not aware of them, you could end up paying significant amounts on surprise charges.

Should you get a 0 interest loan

A no-interest loan or a 0 interest loan makes sense if you are the kind of customer who can afford to make payments on time. Your track record before taking up a loan of this kind should be immaculate, and this will reflect on your credit score. Bad credit score is not good for availing 0 interest loan so one should know how to build your good credit score.

If you choose to apply for a no-interest loan, you ought to be aware. You must be comfortable with paying your interest on time without incurring any unwanted interest charges. Here are some best practices to follow in case you decide to opt for taking a 0 interest loan:

  • Make sure you read the fine print of your loan agreement. Make an intelligent call when taking up these kinds of loans. If this is something you do not feel confident about, avoid it. It is better to take out a personal loan on interest than opting for a 0 interest loan only to pay penalties.

  • Make every minimum payment without fail. Sometimes you might feel that you might not be able to pay the whole amount towards the end of the loan period. In this case, make larger payments during months you can afford to. Needless to say, never miss a payment or be late for one.

  • When you take out a 0 interest loan, make sure to never spend beyond your means. A lot of the penalties that people have had to pay on this kind of loans stemmed from not having enough money to make the monthly payments.

Conclusion

Just because a loan is advertised as 0 interest or no cost doesn’t mean that there is not a hidden price in the fine print. Ask yourself if your purchase is necessary, to begin with. If you believe so then attempt to raise the amount yourself. Never take debt lightly. If you do so, you might find yourself in more debt than anticipated.

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