No interest or 0% loans are the kind of loans where you are only required to pay back the principal amount. In simpler words, you are only required to pay back the borrowed amount without any interest, this only applies if you pay back the money within the time frame that was agreed upon during the time of borrowing. Failure to pay within the due date will result in high-interest rates or hefty penalties. Not everyone is eligible for these loans, in order to avail 0% loans, borrowers are required to have a good credit history and credit score.
Though you don’t have to pay any interest on the borrowed amount, it does not mean this service is entirely free, payments come in the form of hidden charges like originating fees and sometimes in the UK when you transfer money from a standard credit card to a no-interest credit card, there may be a transaction fee applied. These loans can usually be found as introductory 0% loan offers on electronics, financing, furniture or auto loans.
In the words of Certified Financial Planner David Rae, “0% loans do exist, but a lot of them do have a fine print that makes them not as great as 0% or free sound.”
What to Keep in Mind Before Availing a 0% Loan?
As alluring as they sound, 0% loans can help only if you are in the position to pay off the loan within the given time period, here are a few things you should do before availing a no-interest loan.
- Ensure that you have understood all the rules and regulations that come with the loan, this means being sure of the deadlines and penalties that can be charged if you fail to pay on time.
- Re-evaluate the need for the loan, is it for something that is really necessary or something not as important.
- Try and source the money from elsewhere if possible, it is always a wise option not to avail a loan until and unless there is no other avenue open.
- If you end up availing a loan, be sure to make payments every month.
The Eligibility for 0% Loans
If you have an above-average credit score and you’re looking for a small amount with all the documents, it may take up to 48 hours to get approved and longer for bigger amounts of money.
Not everyone can avail a 0% loan as there are certain requirements that need to be met before filling out a no-interest loan application.
- A score of 720 or above is required in order to be eligible.
- The applicant must be 25 years of age or more.
- The applicant must have a steady income.
- If the applicant happens to be self-employed then additional documents have to be provided to prove the same.
- The applicant should not have any cheque returns in the last six months.
Where to Avail 0% Loans?
Assessing your present financial situation is vital before availing a loan. Try to source the required cash through other means and reason with yourself in regard to the need of the particular product you wish to buy and still, if you wish to avail the no-interest loans, then be sure of all the conditions that are a part of the loan. There are a lot of places where you can avail 0% loans and the number of retailers who offer this financing is also increasing in recent times.
There are quite a lot of vendors who offer 0% loans to cover medical expenses and often require the respective medical provider to partake in their programs. Some of these loans are interest-free throughout the life of the loan, while other lenders charge interest if the borrower is not able to pay back on time.
If you have an excellent credit score, some auto dealerships may provide you with no-interest loans on second hand cars. Though interest-free, it may cause you to lose some of the incentives that come along when purchasing a car like a manufacturer’s rebate.
Electronics and Furniture Retailers
Usually, electronics and furniture retailers always offer a good deal on their product by providing 0% loans, if you miss out on any of the monthly payments then interest will be applied to the remaining amount.
Some non-profits organizations also provide 0% loans to people who are in temporary need of finances.
Penalties and Fees
As mentioned before, though they are dubbed as 0% interest loans, it doesn’t mean that there is no charge. Service fees and other hidden charges will always crop up. Lenders can cancel the no interest feature if you delay even a single payment and sometimes, the processing fee or the originating fee is as good as paying the interest itself.
As you now know, 0% loans are available for almost everything. Keep in mind that the amount you avail is to be paid back on time. It is important to ensure that you are in a position to pay the borrowed amount on time, as failure to do so may make things much worse.