With lockdown restrictions lifting apart, people are heading to spend the best times of their life exploring things they missed during the phase.
While some individuals, who are good with finances, enjoy every penny. Some individuals search for the best loan deals to bridge the money gap.
Borrowing a sum should be the last resort for individuals. Check for the build-up savings-like- Retirement fund, emergency fund, dividends, etc., to meet the need.
However, it is advisable by experts not to drain these funds for a small and manageable purpose. But tap into these funds only if you do not find any hope of getting one. There are multiple ways of securing monetary help.
How about borrowing interest-free without dissolving your emergency account?
Yes, it is true.
Not all loans in the UK are interest-free, but you can explore some and get one if it aligns with your requirements.
What Does Interest-Free Borrowing Imply?
Interest-free loans mean the exact word-by-word. These loans are not absolutely free. Here are 3 conditions under this:
- Condition 1
Lenders offer customers a provision of waving off the interest rate for a promotional time. After a period of completion, the borrower will have to pay the full loan. One will have to accrue interest only if he cannot do so.
- Condition 2
Sometimes, the lenders apply an interest-free period for a certain period. You must have encountered this type with -0% APR on credit card loans or interest-free financing. The interest-free financing is applicable only for 1-2 years. After this, the individual has to incur interest in the remaining loan period.
- Condition 3
Interest-free loans charge different fees- origination fee, application fee, pre-payment fee. Lenders usually deduct the amount from the loan amount itself. Therefore, interest-free loans are not completely free.
This is what an interest-free loan means.
But now, you must be asking,
Are Interest-Free Loans Literally- “Interest-Free”?
Some vendors offer interest-free loans for expensive goods and services. Here are some places you may encounter interest-free loans. However, as mentioned above, these are not completely interest-free loans. Some examples of the same are:
- Car dealerships
Car dealerships sometimes offer no-interest loans to consumers. This is done by promoting new cars in a row. There could be other reasons, like the dealer looking to clear old stock, etc. But, if you are seeking car finance, it can be a promising opportunity.
- No-interest deals on expensive products
If you are exploring an exquisite product range, you may receive certain discounts on the loan. It can be in the form of interest-free credit card loans, instalments loans, etc.
However, loans for buying anything are known as personal loans. Personal loans are hardly free from interest. It is unlike borrowing loans for the unemployed with no fees. In this, lenders waive the fee to assist the individuals in crucial times. Genuine lenders help individuals overcome challenges with smooth and transparent borrowing terms.
Thus, the interest payment could be deferred to a defined time limit in these offers, not eliminated. If one cannot pay before the promotional period ends, it is no more an interest-free loan.
It’s Ok if there are no interest-free credits, you can still benefit from the interest-free periods. Let’s know how you can leverage interest-free periods to save goods.
How Does one leverage an Interest-free period and Save goods?
Borrowing without paying interest initially is possible. Prepare a repayment plan before you do so. It is important to pay off all dues before the interest-free period completes. It will help you prevent defaulting on the loan.
Here is how you can borrow interest-free:
- Credit Cards
One of the best ways to meet urgent requirements is by taking an interest-free credit card loan. In this, a borrower can make buys on a credit card without settling interest.
The credit cards are usually for the individuals sharing existing credit card debt and seeking some time off to pay it. You can take out an interest-free credit card for 12-24 months at 0% interest. The provider will charge a fee only when you transfer your credit card balance from your existing one to the new one. There will be no interest during the interest-free period.
The borrower needs to pay off the same after a defined period. Hence, one should plan the repayments early.
Apart from this, customers share the flexibility to protect their purchases- any purchases under Section 75 of CCA (Consumer Credit Act).
In this, it is the responsibility of the credit card holder to safeguard the purchases above £100. These purchases can range anywhere from holiday bookings to buying goods online. One can claim the money back if one does not receive the product in exchange.
Overdrafts allow an individual to withdraw more money than the account holder holds. It, however, allows only a marginal percentage to borrow in this case.
One can borrow through overdrafts at 0% interest to meet urgent requirements. In this, the maximum amount to borrow stands below £30. The borrower, in this case, does not share any potential benefits, as he shares in the 0% credit card borrowings.
- Buy Now and Pay Later Option
Apart from these two, another way to borrow interest-free is by – the “buy now and pay later” provision. Many vendors offer this provision to ensure the ease of buying for customers. But it can prove trouble later. Consumers may purchase the thing in the influence, but the lender may sue if they cannot pay the amount later.
Thus, these are not regulated by authentic authority. If you still want to explore the option, verify the authenticity of the vendor. Buy now and pay later promotes unnecessary borrowing, affecting the overall budget and financial aims of an individual. This borrowing type could lead to a severe debt trap.
- Is it Ideal to get an Interest-Free Loan?
There is no universal fact regarding whether an interest-free loan is ideal for a person or not. What’s more important is the purpose and the research behind it. No-interest loans are not truly free. It is important to read the conditions mentioned in the fine print before signing off the loan.
You can surely rationalize interest-free periods to your benefit. The above mentioned-interest free borrowings will help you serve the purpose.
Lisa Ann has developed a well-experienced professional career. From managing the staff of more than 50+ loan experts at Fastmoneyfinance to boosting the delivery of various loan offers, she has acquired many challenging roles to come out with the best results for the company. Lisa Ann is a Senior Content Author and the Chief Financial Advisor at Fastmoneyfinance. To back her massive experience in the UK’s financial industry, she has the postgraduate degree and diploma in Business and Finance.