Again and again you read about so-called 0% financing. Whether it’s the car dealer, the electronics store or the furniture store; It seems to have become normal for goods to be pumped up and paid back (at no apparent cost) in monthly installments. While the 0% financing was presented a few years ago as a rather short-term action (usually before the Christmas season), today it is omnipresent and indispensable.
But the customer must be aware that if he chooses the so-called 0% financing, he concludes a loan agreement. Because the dealer does not offer financing by itself; behind those offers are banks. This means that it is ultimately a classic installment loan that goes over a fixed term, but does not entail interest charges. The bank pays the dealer, while the dealer pays the installments to the bank. The dealer preferably benefits from this business. Because he can achieve with these offers a so-called increase in sales. Even if the trader (which is not visible to the client) has to pay any fees to the bank, the 0% financing deal is still worthwhile. And the interest-free loans are worthwhile for the institutes. Because the company gains customer data, can reorient its products and present tailor-made offers.
But the 0% financing also has some disadvantages. Anyone who loses his job or can not pursue his job due to an accident must still pay the installments. The same is true even if the TV, game console or fridge is broken and out of warranty. Thus, the customer pays installments for a product that he no longer owns or can use. Especially with very long maturities, the risk is much higher that the installments still have to be paid, even though the products are no longer used. But even the financing itself often represents a danger. Because many installment purchases ensure that the overview is lost. 30 usd for the TV, 20 usd for the game console, 60 usd for the kitchen and 50 usd for the new corner bench – over time, add up the small sums, so the daily life – due to lack of finance – is the task.
And then there are hidden costs. Because even if it is interest-free financing, fees for account management can still be collected. Also, any insurance (credit default, residual debt or installment insurance) can drive the price in the air. The 0% financing only means that no interest will be charged. But it does not mean that there are no additional fees. Also legal disadvantages accrue. Because there is no legal right of withdrawal for such financing. The merchant accepts the goods at most for goodwill reasons or exchanges them – according to the contract – to.
Furthermore, the financing will be entered in the credit bureau. Another point that is often kept secret from the dealers and institutes. Often, the loans should also be compared. Even if there are no interest rates, that does not mean that the 0% financing is cheaper than normal installment loans. Here it is advisable that the customer compares in advance the different financing offers.
The 0% financing needs to be treated with caution. Not only the risk of hidden costs can tarnish the 0% financing; even the fact that there is no legal right of withdrawal and sometimes even the duration beyond the guarantee of the products grows out, can spoil the fun.