Promotions that boast 0% APR or 0% financing get a lot of attention. No one likes the idea of paying interest. So when you see a loan promotion (usually for autos) with that promise, you can’t help but wonder if it’s too good to be true.
Bottom line: it is possible to have a loan with 0% APR. However, there is some fine print you need to look out for.
What’s the length of the loan?
Loans with 0% APR tend to be for shorter terms, which means higher monthly payments. You’ll need to make sure you can fit those payments into your budget.
On the plus side, if you are able to swing higher monthly payments for a short term, it will look great on your credit report.
What kind of credit do you need?
Chances are you’ll need to have excellent credit to even qualify for this kind of offer. Some reports show that only 10% of applicants even qualify for these loans. Part of these promotions is getting you in the door and wanting to buy, and then selling you on whatever financing you do qualify for.
Would a cash rebate be the better value?
Sometimes you’ll find promotions that offer the 0% APR or a cash rebate. Do your math! If you are able to finance with low interest rates, like with your credit union, you might end up saving more money by taking the rebate.
How does it affect the purchase price?
0% APR will most likely mean very little wiggle room for any haggling. If you know you can get a better price somewhere else, it might be easier and cheaper to go there.
Are there any fees?
You’ll also find some promotions that offer 0% APR but with a 3%, 5% or 10% fee. That’s pretty much the same as interest. If you break it down, the monthly rate would be low, probably less than 3%, but it’s something to keep in mind.
Don’t get sucked in to the idea of 0% APR without doing the math and knowing what you’re dealing with!