You can barely watch TV or read the newspaper without seeing advertisements for zero-percent financing for anything from furniture to cars. While these offers can be tempting, they are not always the best deal. The Better Business Bureau suggests you check zero-percent offers very carefully.
Zero-percent financing means you pay no interest for the entire term of the loan. For some consumers that might be true, but most buyers may not even be eligible to take advantage of the special zero-percent offer. Oftentimes, in order to qualify, merchants require impeccable credit and sometimes even for those who do qualify, the offer is restricted to a particular model, brand or style and with limited terms. Often, zero percent financing is only good for short loan terms, which increases the monthly payment, making the offer unaffordable for some buyers.
If you are thinking about zero-percent financing or have a contract with zero-percent financing, here are some things to think about:
- Plan ahead. Take a careful look at your personal financial situation - your income, expenses, and debts - to determine whether you can afford to make the monthly payments without putting too much stress on your budget.
- Do some homework. Compare prices and quality of the merchandise. Make sure you are getting the best possible price.
- Read the fine print. At some stores, zero interest may apply to certain products but not others - and for different periods. Merchants sometimes require the purchases to be placed on their credit card. Be sure to read the sales agreement and make sure you understand and agree with all items before you sign.
- Check the company out with the BBB. To find contact information for the nearest BBB, visit the BBB's web site at http://www.bbb.org.
- Be careful what you give up. For example, zero percent financing on a computer may put you into an installment loan provided by the manufacturer and prevent you from charging the purchase to your credit card. That causes you to surrender important rights to dispute the charge and withhold payment under the federal Fair Credit Billing Act, should the computer prove to be defective.
Keep in mind that credit costs money. While delayed payment plans allow you to purchase what you need or want when you do not have the cash up front, you usually end up paying more for the merchandise when you buy it on time.