No money down! No monthly payment! No interest for 36 months! This certainly sounds too good to be true to most people, and in most cases it is. Zero-interest financing plans originally started with new car dealerships and have worked so well with them that other businesses, such as furniture stores and home improvement distributors have started offering these financing options as well. However, before a consumer attempts to make a purchase using these financing options, there are many facts that they should know.
Though these offers are used to bring traffic into the business, most consumers do not qualify for these teaser rates. In order to qualify for these rates, customers have to have an almost perfect credit score. Typically, customers that qualify for these zero-percent financing offers have a minimum credit score of 750. Additionally, customers are also expected to have a minimum income level to qualify for these offers.
Purchases made using zero-percent financing options typically have a shorter loan term associated with them. This means that the monthly commitment with those purchases that do require a monthly payment will have higher minimum monthly payments than purchases made using alternative financing options. For consumers that are living on a very tight budget, this type of financing could be debilitating.
When purchases are made using a zero-percent financing option, the interest on the purchase begins to accrue from the date of the original purchase. This means that when customers are not able to pay off the balance of their loan by the end of the zero-percent interest term, all of the interest that had been accrued on the purchase during the special financing period will be added to the balance of the loan. Customers that make a purchase using one of these special interest offers need to make sure that the total balance of their purchase is paid in full on or before the last day of the special financing period.
Customers need to look out for added fees on a purchase that was made using zero-percent financing options. Though this isn’t true in all industries, industries such as the new car market sometimes add additional fees to the purchase price to make up for what is being lost in interest income. These are frequently overlooked by consumers because they are so happy to receive the zero-percent interest rate. Customers that have been approved for these interest offers should make sure that there are no additional fees added to their purchase price because of using these offers.
Zero-percent financing offers are something that works great for a select few consumers. However, for the vast majority of consumers, these financing offers are a gimmick that will drive traffic into the business, but something that people will not qualify for. For those that do qualify for these financing offers, make sure to follow the terms of the loan exactly. Additionally, check all paperwork for any hidden fees that might be included with your purchase.
Source: http://www.bcsalliance.com/zero_percent_financing.html