0% finance deals are quite popular in this day and age, known as discounted finance, to attract customers to buy credit cards and cars. Zero percent means you do not have to pay interest on the loan. Zero-percent finance deals are available on car and credit cards. When somebody says you can get a car without interest rates, you will assume they are talking through their hat.
The fact is that it is possible to get 0% car finance, but you will need to meet the following two conditions:
- Your credit rating should be good. A strong credit history will improve your chances.
- Your income source should be excellent. A strong repaying capacity will make it quite easier for you to get the nod.
- You will have to pay a larger deposit. Some lenders will require you to pay 30 to 40% of the purchase price as a deposit.
0% finance deals are available on personal loans, hire purchases, ad personal contract purchases. However, not all lenders provide these deals. Under this deal, you will have to pay down a sum upfront, and then all monthly payments will go towards the principal.
Does 0% car finance really exist?
Yes, 0% car finance does exist. A couple of lenders are out there who will be able to sign off on the application for these deals. But deep down, you will find these deals are too good to be true. No loan can be absolutely free of interest – not that lenders want to make profits in the form of interest.
Money loses its value due to inflation. The value of money tomorrow will be less than its today’s value. The money you are lent belongs to your lenders, and they will undoubtedly like to get back the same value of money.
When you see a loan advertised as a “free loan” or “0% interest-free, you should think about why a lender would loan you without accruing interest. There is something that you must be aware of. You cannot just lunge at such offers because it is likely that you will end up ruing the day down the line.
0% interest deals will certainly have charges and associated fees but will be hidden.
How does interest-free financing work?
It is just a marketing tactic to draw in as many customers as possible to buy something that they cannot afford to buy with their own money. You will get your car on the spot and keep paying down money over a period of months.
- The interest rate is 0% for a period of up to 6 months. This will be considered as a promotional period. As it ends, you will pay off the debt at much higher interest rates.
- Some dealers increase the prices of the car, so the monthly instalments automatically include the interest.
- Waiving off interest does not mean lenders will not charge fees. They are added to the monthly payment, and they may include interest.
The drawbacks of a 0% car finance deals you must know
You can save money on interest by opting for 0% car finance deals, but they are also subject to some disadvantages. You should carefully examine the upsides and downsides of 0% car finance deals. Look at the following examples:
- You will be able to buy used or inexpensive cars
New cars could be extremely expensive, so lenders would like you to buy a used car. You will be able to buy them at half of the price. Since you will pay down a larger deposit, the loan-to-value will be lower.
- The repayment term will be short
The repayment length of car loans exists for 36 months. However, it can be longer when your budget does not seem to have the potential to be able to pay off the whole of the debt. It is generally the case with those who have already taken on another debt like unsecured personal loans for bad credit.
However, at the time of taking out 0% car finance deals, the repayment length will be shorter. It means the size of monthly payments will be bigger. It makes it far more difficult for you to pay off the loan. These deals are not absolutely ideal if your budget seems to burst out with larger payments.
- You will not qualify for the rebate
Car loans offer some sort of rebates that you will not be eligible for if you opt for 0% APR finance. The rebate is a cashback that dealers offer you at the time of buying a car. Before arriving at the conclusion that interest-free deals will save money, you should also consider other alternatives.
- Bad credit borrowers might not be eligible
0% interest car finance deals are exclusively available for those with excellent credit scores. Most of the lenders will not accept your application if you have a CCJ or a very poor credit rating.
However, some lenders or car dealers can approve your application by running a soft credit check. This will not leave hard search footprints on your credit report, s you will not face a further plummet in your credit score.
Bear in mind that these loans will cost you much more money. Compare deals that will help you pick the one that best suits your budget.
0% balance transfer credit card
When you have multiple credit cards, and you are struggling to pay off their balance, you can apply for a 0% balance transfer credit card. This will allow you to transfer the whole of the outstanding balance, so you have a new debt to start to pay off over a period of months.
It is an interest-free credit card, which means you do not have to pay interest. However, it is to be noted that this is an introductory offer. You are supposed to pay off the balance within this introductory period. If you fail to do so, you will pay off the balance with very high-interest rates.
- Your credit card should be decent to be eligible for 0% balance transfer credit card.
- If you miss a payment, the introductory offer will be annulled.
- A 0% interest offer will not apply to new spending on these cards.
- If you are turned down, do not reapply for it immediately as you will lose your credit points as a result of too many hard search footprints.
- A fee will be charged to the debt.
- Only a small amount of the balance will be transferred.
The final word
0% finance deals do exist, but you need to be careful at the time of applying for them. These deals mainly exist for cars and credit cards. Although you can escape paying off the interest on the borrowing sum, it does not mean that you will get money free of cost.
Fees will be added to the loan instalments. They likely cover the loss of interest. An interest-free period, in some cases, is an introductory period, which means you will start paying off interest after the expiry of this period.
If you are looking to get interest-free deals, you should choose a reliable lender like EasyLoansUK. The lender will offer you a deal based on your repaying capacity.
John Keats is a professional content author, specialising in writing blogs and articles covering a range of topics related to the finance and loan industry of the UK. He has been working in the UK finance marketplace since 2009. John has written hundreds of blogs and articles on diverse financial topics. John has experience in several finance areas but mainly belongs to the lending market. He has worked with many reputed financial companies and lending firms. Currently, he is the Senior Content Writer at GetLoansNow, a new-age direct loan provider offering various kinds of online loans. John also contributes to the company by preparing borrower-friendly loan deals and guiding them via his research-based blogs. John Keats has a PhD in Business and Finance from the prominent UK University and a post-graduate MBA in Finance.