Paying interest is a part of life. If you want anything of value, you’ll have to pay interest at some point in life. Whether its an auto loan, a mortgage, a personal loan, or a credit card, you will likely have to pay interest.
However, there are a few ways to get around that. For example, did you know that credit cards, no matter what the interest rate is, you don’t have to pay a dime of interest? Did you know that when purchasing big items, there are many companies that will give you 0% financing to entice you to buy their items.
First of all, let’s look at credit cards. This seems to be the most shocking for everyone, but you don’t have to pay interest on credit cards! Despite the fact that you have a 14% interest rate on your credit card, as long as you pay the balance in full each month, you don’t get charged a dime of interest. And if you’re smart, you shouldn’t put any charge onto your credit card that you wouldn’t be able to pay off tomorrow. What if you made a $300 purchase on your credit card? Do you have the money to pay it off tomorrow? If you do, do it! Don’t pay half of it thinking that it’s worth paying in two installments. You’ll pay interest at 14%, while only gaining 4% in your savings account. Just pay the bill and don’t pay interest!
Secondly, take advantage of competitive financing. The classic example is to go into a furniture store and get 0% interest for one year. Take the financing, and set up automatic payments every month for one twelfth of the balance. It’s as easy as that.
Another good example is when you buy a car. Maybe you’re looking for a new car, and you happen to see a commercial on TV that says 0% interest for the life of the loan. Those companies are BEGGING you to buy their product, and offering free money is the best option. Last year, I wanted to buy a new car, but decided that it would be best to wait for a 0% offer. It took about 8 months, but I recently purchased a brand new Toyota Tacoma, talked my way down $2,000 and got 0% interest for 60 months. It was worth it to wait 8 months to save that much money in interest.
The bottom line, however, in borrowing money without paying interest is having good credit. Continue to pay your bills on time and you will be rewarded with interest savings. Even when you do have to pay interest, it will be much lower. For example, if you borrow $200,000 at 7% (with poor credit), you’ll pay $47,341.42 more in interest over the life of the loan than a 6% interest rate. Isn’t that incentive enough to pay your bills and lower your credit score?