Be aware of interest free deferred payment credit deals and loans since they may not be interest free at all. Many interest free and deferred payment deals come with traps and pitfalls attached to them that you should know about. In our latest two articles we focused our attention on effective methods aimed at calculating and negotiating best possible discounts from ticket prices in case you prefer paying by cash instead of buying it on a credit deal. In this article we will focus on hidden traps planted into the small print of interest free and deferred payments credit deals which at the end can make them truly very expensive deals.
So, before you sign up for any apparently convenient interest free or deferred payment deal, check the small print or ask the sales person for things in the list below.
Checklist for Interest Free and Deferred Payments deals.
Yes / No
Are there any fees included? For example:
– administration fee
– fee for performing credit check
– credit application fee
– credit approval fee
– account opening or account establishment fee
– account maintenance or annual account fee
– credit contract cancellation fee
If not fully repaid within interest free period, will the interest commence after that period or will be retrospectively calculated from the beginning?
Is there any penalty charge if loan repaid early before the end of interest free period?
Is there any penalty charge for making voluntary repayments during the deferred payments period?
How much will be the interest after interest free period?
Are there any compulsory items attached to the deal, like extended warranty, item damage insurance or repayments insurance?
For store cards, are there any cash advance or ATM withdrawal fees?
For cash advances and ATM withdrawals with store cards does the interest apply only to th amount withdrawn or to the whole credit balance?
How much are the late payment and remainder letter fees?
Will the interest deal continue to be interest free also after you miss just payment or break just one condition even if you quickly catch up and never may another mishap?
Before you sign up for any interest free and deferred payment deals, make all the checks like you would do before purchasing a car. Do not get caught in a financial trap. Sum up all the fees and calculate the effective interest rate. You may eventually find out that taking another credit option may be cheaper and incurring less interest than the interest free store deal. Also write down all conditions of the loan and make sure that you never break them. Otherwise the whole interest free loan can instantly turn to a nasty interest and fees bearing one.
I purchase a notebook in jan 2010.I payed for a few mths then thought there was no more to pay, no interest to pay in the 40mth time allocation.I rang up to find out the payout figure as the 40 mth period is up & found myself speaking to a debt collector who is demanding I pay $1800 and I only owe $850.The debt recovery told me because I stopped paying my account got sold to recovery.I was led to believe at the time of the adds which I saw on television that Harvey Norman said they had good deals which said (No interest nothing to pay interest free for 40 months)Could you please reply and tell me how I feel I am misled and explain why!! thankyou Pamela Doyle
Hi Pamela, it could have been a deal like 40 months no interest and 18 months deferred payment. Which means that while interest is not charged 40 months but paymemts kick in sooner.
It is important to read exactly what kind of deal it is as they change every week.