I've had a lot of questions asking me how I do 0% interest financing. This post is about how I make it work for me.
I view this type of financing simply as a tool to help me easily get the things I need, and sometimes want, while keeping my savings account intact.
Taking advantage of interest free offers isn't as risky as it once used to be, but you still need to be careful. Know the terms and know when the offer ends and what the interest rate will be if you don't pay it off before the no interest period ends. Remember that not paying it off before the interest free period ends pretty much defeats the purpose of zero interest financing.
The key to making this work is two-fold.
1. Make sure the payment fits within my monthly budget.
Before I make a purchase I consider the offer. How long is the interest free term? Then I take the final purchase amount and divide it by the length of the term to see how much I need to pay each month to make sure it is paid in full before interest kicks in.
If that fits in the budget, then I go ahead with the idea that I will also pay extra each month so it is paid off earlier. I am always more comfortable if I can pay off a loan well ahead of its due date. Paying more than the minimum payment is always a good idea, interest or not, and helps raise your credit score too.
2. Make sure I don't get carried away and over extend myself.
One thing I am very careful about is not to take on a new loan, tempting as that may be, before I pay off the last one. Another good reason to pay extra every month and pay things off early.
I also like to make sure I have enough in my savings account or emergency fund to cover a payment or pay it off if I need to. Anytime I can keep my own cash while using someone else's is good for me. As long as I am smart about it.
The biggest reason I take advantage of 0% interest offers is because I am able to acquire things while I keep my own money in my savings accounts. I have used these offers multiple times to purchase appliances, furniture, home improvement supplies for big projects, my daughter's braces and most recently my car.
I hope this helps clarify things a bit. If you have more questions I am happy to answer them. I'll do another post soon about how to use zero interest credit card offers to pay off debt.