Is an interest free loan beneficial?
13 June 2008
Interest free loan finance options from retail stores may seem tempting at first, but remember that they would not be offered if they didn't maximise profits. An interest free loan from a furniture store, for example, may seem like excellent value initially, but you may want to look closer at whether or not they are really doing you a favour.
Often, retail outlets offering an interest free loan will mark their prices up for the period in which they are offering an interest free loan. This obviously only applies to limited offers rather than ongoing finance options, but if you see an advertisement for a limited time interest free loan option, it will probably be designed to bring in extra sales at minimal to no loss.
Extremely long interest free loan terms, where you don't need to pay for an extended period of time can also be a ploy to get the most money out of you possible. Often, once the interest kicks in it will be quite high, but many people forget about the loan until they are required to pay it with interest. The lengthy interest free loan period can be designed to set the customer up to forget about the loan, even if they only intended to leave it for a short period of time.
You may be better off using a personal loan to pay for expensive purchase, rather than choosing an interest free loan. In this way you can more easily know the true cost of what you purchase, as well as stick to a budget rather than getting swept into a shopping frenzy once you visit the store.
Please visit our loans comparison page if you would like to look at personal loans as alternatives to an interest free loan.
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