Interest free credit - yes please!

The benefits of interest free credit

Interest free credit is normally offered on expensive household items. The following article explains why you should definitely take it even if you have the money to pay for the items in full:

Taking on debt with zero percent (0% interest) interest is an interesting one....

...I've always been one to encourage readers to avoid debt at all costs. Recently I have come to the realisation that not all debt is bad. For example, student loan debt is necessary in order to help boost your long term income as people who hold university degrees tend to get paid more. Alternatively, taking on an affordable mortgage will help you to get onto the property ladder and hopefully own a rapidly appreciating asset (keeping in mind however that your house is not an investment!).

When it comes to buying a home one of things that tends to get forgotten until the end is how are you going to pay for all the items to fill your new home? More than likely virtually all your savings will be depleted having been spent on the property, legal fees, mortgage fees, conveyancing, valuation fees and taxes. There is unlikely to be much money left over for the big purchases such as beds, sofas, table and chairs etc. 

Why you should accept interest free credit

As mentioned in a previous article it is important that you shop around and negotiate for the best deal on these durable goods. Sometimes though, the price just isn't low enough. In addition shops rarely offer any discounts for paying for the furnature up front. Virtually all furnature shops offer interest free credit from anywhere between one year to five years. Take them up on it!!!! 

The reason why it's ok to take on this sort of debt is because it doesn't cost you anything extra. There is no interest charged on the purchase. All that it means is that you delay having to pay the money in one go. This means that the money can stay in your bank account for longer and earn interest (assuming your savings account pays interest!).

Interest free credit example

A quick example:

You're buying a bed for £1,000 and the shop offers you four years interest free credit. This will mean that you will pay the bed off over the next four years and it will cost you £20.83 per month which equates to the £1,000 over the 48 months. You may be of the opinion that you don't want any debt in which case you would argue that you're happy to pay the £1,000 up front. There is no advantage to this at all. All it will mean is that at the end of month one you are £1,000 shorter in your savings whereas the person who took out the interest free credit is only £20.83 worse off.

Use interest free credit if it is offered to you!

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