Interest free loans
What are interest free loans?
Whenever you want to borrow money for a purchase, be it a house, a car, a boat or for some other reason, you will have to pay interest on the money you've borrowed at some stage of the agreement. Banks and other financial institutions are not charities and interest charges are where they make much of their money. When you're researching the market for a good deal for a personal loan you may see special introductory offers from lenders that specify interest free. In most cases the offer of an interest free loan may only be for a relatively short period of time as you start out paying it back. It depends on the agreement you have with your lender, but several months or longer with paying no interest can be of great help to your cash flow.
Why do people use interest free loans?
Buying a house, in particular, is an expensive business. Apart from the cost of the property you will have to pay legal fees, application fees and fees for a surveyor - so after all the expenditure you could do with a breather. That's why an interest free period of a long-term loan can prove very attractive, helping you with your budgeting and reducing your outgoings. Some retailers of large items, such as furniture, may offer interest free loans over a period of a year or more. You may have to pay a deposit and your repayments will be fixed, but the item you purchase could be more expensive than if you were able to pay the lump sum when you buy it.
What are the main features of interest free loans?
You can discover a range of interest free loans when you research the personal loan market to make comparisons between financial products on offer. You need to examine the period of time a lender will waive interest and make sure that you are not disadvantaged with a higher interest rate when it kicks in after the agreed time period. Lenders are in a very competitive business environment so special offers like this can be an attractive way of getting new customers. Make sure you do your homework thoroughly to see if an interest free loan has hidden charges somewhere along the line, and look into the rates that will be charged when the interest-free period terminates.
What are the pros and cons of interest free loans?
Saving money at the beginning of a personal loan period can be a very helpful way of managing your money and developing your budget. You need to decide if you will choose a fixed or variable rate interest charge when the interest-free term is finished and be prepared to repay a larger amount than when you began the agreement. Interest charges make up a very large part of your overall repayments, especially over a long period of time, so it's well worth examining if this is a good route for you to take.