You got a fast car, is it fast enough for you to fly.Browse Topics
Are you reading the small prints when taking out an interest free car loan
When you are struggling with finances but want to buy a used or a new car, you can get what is called an interest free car loan. Under this scheme, you do not necessarily have to pay any cash upfront and this will give you enough time to save for the car and pay for it afterwards. Therefore you can get the car that you want now and not incur any interest on the money borrowed.
You will find that some manufacturers or car dealers will offer 0% interest rate when you buy a car with them. This is usually an incentive to get more customers and you should not jump into a purchase too hastily as there are conditions attached to the deal. Most of the time, you'll need to have a good credit history to get 0% car finance but what matters more is the fine print of the contract you're going to sign.
The fine print
If you respect the conditions of the contract, you will not face any problems. However if any part of the agreement is breached, you may have to pay more than what you bargained for. Let me explain - usually with a car loan which is interest free, you do not pay any interest on the amount you are borrowing for a set time, which could be something like 6 months or more. After this set time, the rate at which you will pay interest can be as high as 30%. The lender can charge this higher interest rate not from the end of the interest-free period but as far back as when you applied for the loan, that is, since Month 1.
Just to give you an idea, interest rates on credit cards are usually around 12% APR (Annual Percentage Rate). Therefore a rate of 30% on a car loan will cost you a small fortune and if you were already struggling financially, it will make things much more difficult for you.
Adhering to the contract religiously
You should therefore aim to repay the car loan within the set time that the lender has allocated to you so that you do not get any surprises afterwards. Set up a direct debit and pay a part of the loan each month and keep a record of all payments made to the lender. This will help in proving you paid your loan within the set time in your contract, should the lender claim otherwise. Without this proof, the lender may say that you haven't made the payments on time and you will be liable for the atrocious interest rate and other nasty surprises.
As long as you have read the small prints and asked for the conditions involved with the interest free car loan before signing anything, you just need to honour your part of the contract and enjoy the great offer that you are getting.