There are some places which will offer us products with interest free interest. This can range from clothing catalogues, and furniture stores to window and conservatory sales and car dealerships. There are quite a few companies that could potentially offer it. It can look really attractive and many people use it; but is it a good idea? Initially it is hard to find any fault with it but
What is interest free credit?
Interest free credit allows you to have items without paying for them right away. Companies will offer this to try to encourage sales especially on larger items that may not otherwise be easily affordable. You will not pay more for the ticket price but you will be able to take longer to pay for the items. You will normally have a monthly amount that you are expected to pay and you may repay over a series of months or years.
Why use it?
This can help out in a number of ways. It can mean that you will be able to afford to get the item without having to apply for a loan or save up the money. You can spread the repayments which makes it more affordable as well. With no interest to pay, you will not be paying huge amounts of extra money in the same way that you would if you used a loan or if the credit was not interest free. It may allow you to purchase items that you feel you would never have been able to save up for, perhaps if you are not good at saving, for example.
Problems with it
Although this looks like a great deal there are problems that you need to be aware of. Firstly, because there is no interest of the item then it is often priced more highly to start with. If you compare the prices with other retailers you may find that you can buy the items from them, without the interest free credit at a cheaper price. It may therefore be better to save up for it and pay less when you do buy it.
If you miss a repayment then things can get expensive. You will find that you will then be charged interest and possibly fees as well. This could be dearer than a conventional loan as well so watch out for this. Make sure that you are aware of how much this will be. Also ensure that you are confident that you will have enough money to be able to afford all of the repayments. Think about the short term and the long term. It can be tempting to assume that if you can afford the repayments now, that you will always be able to afford them, but this may not be the case. The longer it takes to repay the loan, the more risk there is that something unexpected might happen in the future and you might not be able to make the repayments. Make sure that you look carefully at your current finances and see how much you will be able to afford to repay. Think about how well you are managing your bills and expenses now and whether you think that you will still be able to manage them when you have these repayments to cover as well.
You may also be tempted to buy things that you would not normally buy because you do not have to pay for them right away. If you do this for a lot of things you could find that you end up having lots of repayments and finding them difficult to manage. It can be very easy to think that it is okay to buy these things as you do not have to pay for the whole cost right away and ignore the fact that you will have to pay for them each month for a while. Finding the money to do this could mean that you will struggle to pay for other things. It is really important to therefore know exactly how much you will have to pay each month and work out whether you will be able to afford it.
So, although buying interest free can seem like a good idea you do need to be careful. You could still end up paying more for the goods and you will need to make sure that you can cover the monthly repayments. If you miss a repayment then it could end up being very expensive for you and so you may end up regretting your purchase. Make sure that you are also not paying significantly more for the item than you would if you bought it outright from a different place. Also make sure that you do not buy items that you do not really need just because they have interest free credit.