[Inz]

Has anyone ever used a free financing offered by a store or company? I never have and am curious as to whether or not they are as truly 'free financing' as they claim (no payments or interest for x time period).

I'm wondering because if there really are no payments or interest for a year why wouldn't everyone use them. Say you want to buy something for $1000 and you already have the $1000, instead of paying up front you finance the purchase with the program, invest the $1000 in a relatively secure investment (or a risker one if you choose). When payment is due, just pay if all off at once. This way you get the item now and make a return of the investment. It also seems the real purchase price (at time of payment) would be lower due to inflation.

With all of this combined wouldn't it just make sense to finance purchases if the financing is truly free rather than buying the item out right?

Any experiences, thoughts would be appreciated. I'm sure there is some catch that would make this less of a good idea than it seems to be right now.

 

[Tech2]

The finance company is betting that most people won't pay off the item in time, which means that the interest is due in full at the end of the one-year period. For example:

I bought a $3500 TV on an 18-month interest free loan. If it wasn't paid in full on the 18th month, they added a $600 interest fee. I paid it off one month in advance.

 

[Inz]

Thanks for the information. Do you happen to know if/how free financing affects your credit rating?

 

[Tech2]

Not that I am aware of.

In my case, I bought the TV at Circuit City. In order to get the financing deal I had to open a CC credit (card) account with them. I had the money to buy the set out-right, but figured I'd keep the cash in an interest bearing account and make monthly payments on the interest-free loan.

Minimum payments were not required on my 'loan', but some do require a minimum monthly payment. I think the only way it could affect your credit is if you miss a payment (if required) or flat-out default on the loan.

 

[Inz]

Thanks again for the insight. Looks like free financing is the way to go if it is offered.

 

[scompton]

I've used them a few times and it hasn't effected my credit rating. I just divide the total by the number of months with no interest and pay that each month.

 

[Yikes]

TANSTAAFL

 

[circuithero]

I thought it was TINSTAAFL

 

[Carmantom]

Quote:

Originally Posted by scompton /img/forum/go_quote.gif I've used them a few times and it hasn't effected my credit rating. I just divide the total by the number of months with no interest and pay that each month.

Precisely how I do it. In fact, I am told that once you pay off the loan, if you leave the account (credit card) open with a zero balance it actually helps your credit. I used to think the more you pay off and cancel the better your credit gets. Not true from the lips of a finacial officer.

 

[Tech2]

Quote:

Originally Posted by circuithero /img/forum/go_quote.gif I thought it was TINSTAAFL

If only to prevent the use of a double negative.

 

[Lazarus Short]

[size=small]CAREFUL WITH THAT [size=xx-small]fine print [size=small]EUGENE!![/size][/size][/size]

 

[kydsid]

I use them all the time but only when linked to a you get x discount if bought on our credit. I get my discount, pay off the account the next day and close it. Doesnt even show on credit report.

 

[Yikes]

Quote:

Originally Posted by circuithero /img/forum/go_quote.gif I thought it was TINSTAAFL

That works, but it's usually TANSTAAFL

TANSTAAFL - Wikipedia, the free encyclopedia

 

[Uncle Erik]

You might pay a higher price for the item up front, as well. Thing is, the company has to pay something to extend the credit to you as well as pay their supplier. They aren't making the offer to lose money to customers.

Also, they usually advance all the interest if you go over the pay period or make a late payment. And I hope you know they get very, very creative with what's a "late" payment these days.

Caveat emptor. Read the agreement very carefully. You might be better off applying for a low interest credit card and using that instead.

 

[Inz]

I would never do this to buy something I couldn't presently afford but rather as a way to 'discount' any purchase by the accrual of interest on the money I will pay for the item with by holding it for a longer time period.

Thanks to everyone for sharing their experiences. Pending the fine print, this seems like something I will try to do more frequently in the future.