Disadvantages of a 0% financing in comparison to the installment loan Zero-percent financing initially sounds extremely tempting. Why pay interest when you can do without it?? This question is asked by many consumers who turn away from the installment loan to the supposedly cheaper alternative. In principle, all offers should be thoroughly checked. Carefully compare with each other. Because often a good installment credit evenly nevertheless better than a 0 % financing.
Pixabay.Com © geralt CCO Public Domain The number of tempting offers with zero-percent financing is steadily increasing.
How zero-percent financing works
In this form of financing a dealer cooperates with a credit provider. Consumers who purchase goods via zero-percent financing conclude a credit agreement with the relevant provider. Just as with all other loans, a credit check takes place beforehand. Likewise, installment amounts. Fixed term. With the disbursement the dealer receives the purchase price for its product, the monthly rate payment without interest takes over the customer. Advantages and disadvantages of zero-percent financing at a glance:
Advantages
– even without equity capital, a purchase is possible with the exclusion of additional costs – neither savings are required nor do consumers have to liquidate their possibly profitable capital investments extra – a temporary financial bottleneck can be bridged well
– if no interest is charged, this does not at the same time mean that the goods themselves are also a bargain – as a rule, there is a severely limited scope for negotiation with regard to the purchase price, and cash discounts are also eliminated – advertising is heavily biased towards this, that each consumer can afford the appropriate product problem-free – by the omitted interest smaller rates stand in the area, which distract however easily from the actually, relatively high purchase price – a detailed consultation or clearing-up over the risks as well as characteristics of the zero-percent financing does not give it usually, since the coworkers of the dealers do not have training as bank purchase men
What loans of any kind are taken out for
In general, there has been a change in the world of private finance: Whereas in the past we refrained from making a purchase if we could not pay for it in cash, today we pay more for the purchase of luxury goods and the like. Simply taking out a loan. Among the most common reasons people choose to borrow:
– Vehicle purchase – Purchase of kitchen equipment and furniture – Rescheduling of already running installment loans – Purchase of consumer electronics and computers
Even if the travel fund is set for a longed for vacation If it is not sufficient, it will be partially financed by borrowing. In the meantime, we can afford many things for which we do not have the money, but do not want to do without.
Pixabay.Com © andreas160578 CCO Public Domain Most often, German citizens take out a loan to buy a car or motorcycle.
Zero-percent financing – more appearance than reality?
Experts pointed out that zero-percent financing usually sounds better than it really is. It was conceived by the retail trade, which thought up thereby a practical solution for all humans, who can fulfill so despite not sufficient budget their desire for a certain object. Vehicles, home furnishings, electrical goods and much more can thus be purchased without a strong financial background.
Before signing a contract with zero-percent financing, however, you should take a close look at the provider you are considering. There are undoubtedly risks involved in buying from a dealer, and every consumer should be aware of this. Which disadvantages the attractive variant without interest exhibits, we summarized below.
Less transparent and often more expensive
If you look at the advertising, it is all very simple: the purchase of expensive objects can be accomplished through small installments without any interest charges. Consumer centers, however, issue a clear warning: Free loans are seduction purely, products are acquired, which one cannot afford in principle at all.
It is also important to know that dealers set the basic prices for their objects – offered with zero-percent financing – higher from the start. In this way they compensate for the loss of interest of the financing financial institutions. Buyers thus have to reckon with the fact that the offer may be less interesting than that of a competing company.
In addition, one should pay attention to the fixed interest rate. There are some banks that only waive interest for the first few months of the term. Thereafter, these may turn out to be comparatively high, which of course significantly increases the monthly installments. Since such agreements are often found in the fine print, the contract should be studied thoroughly.
Loss of consumer protection rights
If the consumer does not pay interest, according to a BGH ruling, zero-percent financing is not a consumer loan. As a result, he must forego some consumer protection rights. Among them, for example, the following scenario: if the purchased product is to be exchanged, the customer must first pay the credit anyway as agreed. This is based on the fact that the bank is still entitled to the monthly payment of the installments – it does not depend on whether the dealer takes the goods back. Financial institutes offer the possibility of the contract dissolution, with cancellation fees is to be counted however. As a rule, they amount to one percent of the credit amount. Until the matter is finally resolved with both the financial institution and the dealer, the installment payment may not be stopped.
Advantages of the installment loan over zero-percent financing
Above all, when taking out a loan through an independent financial institution, it is advantageous that many dealers offer a quite respectable Give cash discount. Therefore, it is advisable to carefully compare both options, i.E. Interest-free financing with a conventional installment loan. It is not uncommon that the latter comes the consumer in the end more favorable.