There are many offers for zero percent financing: Buy now, pay conveniently in installments and without interest. More and more dealers are enticing customers with interest-free loans for their new car or TV. However, financing without interest can be expensive. A zero percent loan is often not as cheap as it seems at first glance.
What is behind a zero-percent loan?
Advertising promises with a zero percent financing are omnipresent today: furniture stores, car dealers and electronic markets offer the purchase of many products with an uncomplicated financing without interest.
More precisely, the buyer takes out a loan with a bank with which the dealer cooperates. The bank then reimburses the dealer directly for the agreed loan amount. The buyer therefore pays the bank back the sum in monthly instalments. Basically, this is a classic instalment loan. With zero percent financing, two contracts are concluded in principle: the purchase contract with the dealer and the loan contract with the bank.
Beware of hidden additional costs
The attractiveness of zero-percent offers among retailers is increasing. This is reflected in the number of rising consumer loans: the trend away from financing high-priced and durable consumer goods is moving towards low-priced consumer goods.
However, consumers seldom notice at the conclusion of a contract if additional costs are hidden behind the free financing. For example, there may be charges for account management that have been overlooked in the small print of the contract.
Another trap is an additional credit line in the form of a credit card. With this form of credit there is a high risk of losing the financial overview. Similar to the overdraft facility of the current account, the customer can use a credit card when shopping. Here, however, the zero percent offer no longer applies. Repayment can be expensive and protracted, as the interest rates may be even higher than with overdraft facilities.
What alternatives are there?
If the necessary savings for a great offer are missing, the missing money often has to be available quickly. At this point, zero percent financing is an enticing option to make the purchase immediately and bridge the financial bottlenecks. However, consumer protectors have long warned against this type of financing, as it tempts impulse purchases. Without much thought, people buy supposed bargains that might be cheaper elsewhere. Another point is that, unlike credit experts, traders do not check individually whether the customer can afford to pay the monthly instalments. Particularly with several purchases, these can quickly exceed the buyer’s budget.
In order to avoid over-indebtedness, it is advisable to consider an installment credit, for example from KVB Finanz, instead of zero percent financing. The immediate loan also offers the advantage of quick availability – the money is usually on the borrower’s account within a few days. The most important thing, however, is that financial experts check the consumer’s financial scope and creditworthiness beforehand and prevent customers from becoming overindebted and falling into arrears.
Banks and credit brokers determine the optimum instalment amount and term individually, so that borrowers have a high degree of planning security. In addition, those who pay for larger purchases with cash benefit from significant discounts. Especially when buying a car or new furniture, customers can save money thanks to the cash discount.
Bargain or cost trap?
Although free financing from a dealer may look like a tempting bargain at first glance, consumers should look carefully to avoid falling into the cost trap. The following practical tips have proven to be successful: Compare product prices, ask questions, read through, check advantages and weigh up the duration of the loan against the loss in value.
In principle, it is always worth comparing with credit offers from banks and credit brokers: the repayment does not drag on, there are no fees for exhausting the credit line and the conditions are better. Another bonus is that financial experts draw up a solid financing plan for their clients that contains no stumbling blocks and thus offers immense security.