Interest-free loans would be helpful in many types of financing. But be careful, there is more to it than you might think. Interest-free loans almost sounds too good to be true, because it is often the interest that many borrowers struggle to finance. An interest-free loan sounds like a free loan that simply repays what you get. An interest-free loan, many believe, should not be worthwhile for the bank, because it earns money from it. Loan interest is not the only thing that banks use to make their money on loans.
Interest-free loans from branch banks
You have to say that really interest-free loans are rarely found at branch banks. If, as a borrower, you find such an offer, you have to take a close look and not strike immediately just because you don’t pay interest. The terms and conditions are usually set differently in the loan contract than a cardboard display in the bank would like to make you believe.
It may be that there is no interest on the loan, but there will certainly be other costs for the borrower. Such can then be ancillary credit costs. For example, you then pay commissions or costs for the loan yourself, and credit account maintenance fees may also apply to an interest-free loan. An interest-free loan may only seem like a good bargain at first glance, but the downfall of the ancillary loan costs for an interest-free loan often amounts to a higher amount than you would pay with a normal installment loan.
Interest-free financing when buying a car
However, there is another way and that with so-called 0% financing. Such are offered for example when buying a car – they also offer various electronics stores. Such financing is even very often offered when buying a car. For interest-free financing, however, it is necessary that you can not show negative Credit Bureau entries and have an unlimited employment contract. But you should also calculate well with the car dealers and their 0% financing. An installment loan may even be cheaper and by paying in cash you can negotiate a discount with the dealer.
Interest-free loans from the state
You can only really get interest-free loans from the government and not everyone. Most of the time, the interest-free loans from the state are support programs, as Credit Aid is one for students. In some exceptional cases, the social welfare office also provides interest-free loans. However, such exceptional cases are usually vital circumstances when, for example, people can no longer finance electricity or water themselves. Such loans, of course, also have to be repaid and mostly the social welfare office only extends interest-free loans for a short time.