One of the biggest activities this time of year buying and exchanging gifts. Seeking out that present that another person will love is exciting for many people. But too often, buying those gifts is not easy (I’m not talking Black Friday crowds). The economy has been rough on a lot of people. They simply do not have the resources this time of year to get out there and purchase gifts. While many will say that Christmas is more than presents, the fact remains that when you are in a situation where you cannot afford to buy gifts for your loved ones, you end up feeling more than a little down. When this happens, people tend to flock to interest free holiday deals, especially those advertised as “no interest.” Unfortunately, “no interest” does not always mean “no charge.”
There are some financial service companies out there that will offer what appears to be a totally free loan. BluCurrent Credit Union is one that offers up to $1,000, with no origination fees, interest free for 12 months (on approved credit of course) during this holiday time. While the finer details of the loan were not available online, there are many things to be on the lookout for. For instance, what are the charges if the payment is late by one day? If you are slow on your payments, and you go 12 months and 1 day, will you be back charged interest for the whole year? Many credit card offers do this resulting in high interest payments for those who did not read the fine print.
There are a lot of no interest offers out there. Almost all of them come with some caveat like being charged interest for the interest free period if the loan is not fully repaid within the interest free period (this means even if there is a $1balance, the borrower will pay all the interest that would have accumulated until that point). Some of these loans have an origination fee (such as $50 to get a $1,000 loan). And there are many “hidden” fees that will pop up if you do not pay on time. A common misconception is that 0% APR for 12 months means no payments for twelve months. Those who get into this trap can end up seeing their loan costing a whole lot more than they intended.
While it would be nice if companies out there were truly being benevolent and giving away entirely free loans, the fact remains that they are businesses and they are out to make money. Some will be up-front and disclose all the costs and tell the borrower how to use the loan to their advantage and not pay any fees. Others will try to “trick” people into thinking they are getting a good deal, and end up causing them to pay a lot more than they want. The bottom line is: read the fine print and ask a lot of questions. Find out what happens if you miss a payment, pay late, or go past your introductory offer. Some of these great looking deals will end up looking not so great when you do.