What you need to know about 0% finance

You might have seen a few ads about 0% finance and thought that it sounds like a great deal, particularly if you are in the market for a new car, boat, motorbike or caravan. After all, not having to pay any interest on your loan is awesome and is not something you see every day.

Well, it’s best not to get too worked up over these offers, because unfortunately, this is a case of if it looks too good to be true – then it is too good to be true!

So let’s look at some of the ‘hidden’ issues with 0% finance that you should be aware of before you hit the dealerships.

Eligibility criteria for 0% loans

If you are interested in buying a new car, motorbike, caravan or camper trailer on a 0% loan, you might have to jump through a few hoops first. For example, this type of loan often has a strict lending criteria based on a clean credit history and a hefty upfront deposit. You might also need to be a home-owner and employed in your job for a certain length of time.

So if you are renting a home or you haven’t been in your job for very long, you can often be ineligible for a 0% loan. This can be very frustrating and disappointing when you have gone to the effort of deciding which car or boat to purchase, but when you sit down with the sales person to fill out the forms, you find that you can’t access their 0% loans.

Purchasing restrictions for 0% loans

Another problem with these loans is that they are often only applicable for certain purchases. For example, you would need to buy a new car, not a second hand car. So even if you are eligible for a 0% loan, you might still not be able to purchase the car or caravan you have spent hours researching, simply because it’s not an option for this type of loan. Often, dealers will also try to move last year’s models or less popular models using 0% loans, simply to get them off the floor.

Balloon payments for 0% loans

Another problem with 0% loans is not only the big upfront deposit but also a large balloon payment at the end of the loan period. This is a strategy that reduces your weekly payments to make the dealer’s offer really attractive to buyers, but the balloon payment can be as large as a third of the total cost and it can be difficult to find that sort of money. It can be such a problem that some customers take out another loan to pay the balloon payment or even sell their car or boat to make this final payment.

As you can appreciate, a 0% loan doesn’t always stack up, so you should do your research carefully before heading off to a dealership that offers this type of loan. Otherwise, you could be up for a lot more money than you anticipated, making your purchase not as cost-effective as it seemed at first. On the other hand, if you fulfil all of the criteria and are happy to pay a big deposit and balloon payment at the end of the loan, a 0% loan might be the right option for your purchase.

If you are ready to purchase a new car, boat, motorbike, caravan or camper trailer to improve your lifestyle, and want competitive rates – call National Finance Solutions on 1300 13 50 50 or get an online quote today.

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