by Stephanie Manning

Created on: September 03, 2008

With interest rates steadily rising the last few years, zero-percent financing is a steal! Unfortunately, these days, true zero-percent financing is hard to find. While, the big bold letters may say "zero-percent financing", there could be other hidden factors that make it worse than having a median interest rate. Here are some things you should consider before taking an option that includes zero-percent financing.

All too often, we get captivated by zero-percent financing offers and forget to check the underlying catch. Always be sure to read the fine print. Fine print can include major clauses that could make or break you in the long run. Always be sure to carefully read and understand what you are reading. If something doesn't sound right or you just don't understand, be sure to ask what it means. Not asking could mean the difference between a real zero-percent interest rate and a sky-high interest rate.

Among the fine print, you may find the clues as to how these companies can offer zero-percent financing. The most commons ways is by taking on fees, additional charges, or even time frames in which the zero-percent interest applies. After all, why would these companies offer zero-percent financing if there was nothing in it for them?

Annual Fees
It only seems natural that if a company wants your business, they aren't going to charge you to be their customer. Always check for annual fees. Depending on the creditor and amount of the loan, annual fees can range from a few dollars to several hundred dollars. Don't be fooled and find yourself paying a $332 annual membership fee every year. That alone, can cost you more then a median interest rate on some loans.

Time Frames
Many, and I mean many, creditors such as furniture stores, department stores and other creditors will offer zero-percent financingthe catchyou have 6 months to pay it off, or maybe even a year. But what happens at the end of that time frame if you have a balance? The creditor will go back to the first day you made a transaction, and take on a high interest rate. These rates are usually above 20% and are charged on your original purchase amount, not just what is left owing. Therefore, you are stuck with a higher balance than you would have been if you would have just put it on your credit card.

Early Payoff Penalties
Yes, some companies, actually charge you for paying your debt too soon? Why, it's another ways for you to make the a mistake that can then allow them to go back and add interest a zero-percent interest' loan.

Going Over the Limit
Going over the credit limit is another easy way for creditors to renege on their zero-percent financing offer, leaving you with a high interest rate. Go over by so much as 1 cent, and you can consider yourself in the hole. Especially, if you have an annual fee. Many customers forget about that annual fee, and no doubt that the creditor will tack it on at the most inconvenient time, the time that puts you over your limit.

While these things can be obviously stated, they are usually hidden in the fine print. Taking you back to #1 on the listalways read the fine print! Yes, there are some companies out there that offer zero-percent financing. These companies usually only offer these types of loans to those with excellent credit who are not a high risk to the company. However, even for those who do have high credit, they are few and far between. Never pass up a good deal, but be sure to just what you are signing, and be prepared to stick to the stipulations, or else you may find yourself paying more interest then it was worth!

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