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Take Interest in the Details of “No Interest” Offers
The MMI Online Articles are designed to inform, assist, educate and alert consumers.
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Most everyone loves to get something for nothing. For many consumers, this is what “no interest” financing offers represent—at least for a specified time. However, for those who blindly sign on the dotted line, “no interest” financing can become costly.
The trick to obtaining the most favorable “no interest” loan is in recognizing that there are two basic types. The more attractive of the two states in the fine print that once the deadline is reached, if the debt is not completely paid, interest charges begin to accrue. In example, if you wait until a week after the deadline, then pay it off completely, you will pay only one week’s worth of interest.
With the other type of “no interest” financing, if you miss the deadline, you are immediately responsible for all the interest that would have accrued up to that point. For example, suppose you purchase a computer system for $3,000, with no money down and “no interest” for six months, but 20 percent interest after six months. If your “accrued interest” during that six-month period would have been $300, and you miss your six-month deadline, your obligation jumps from $3,000 to $3,300 in one day, with a continued accrual at 20 percent per year.
To avoid loan pitfalls all together, the best advice is to wait to make a major purchase until you have the cash to pay for it immediately. However, if you decide to make a purchase with “no interest” financing, make a realistic plan for pay-off.
Finally, you must make absolutely certain that a payment for the balance is in the creditor’s hands by the due date. In fact, give yourself a cushion by sending your payment a week early. That way, your “no interest” loan won’t haunt you years down the road.
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