Zero-Percent Financing -- Too Good to be True? 

Whether you're reading the newspaper or watching TV, chances are you're going to come across an offer for zero-percent financing. These offers can be for anything from cars to furniture to jet skis. When the music and the pretty pictures come together, combined with your natural desire to acquire possessions, this sounds really tempting.  You get your merchandise now, but do not have to pay for it in the short term.

There are truly zero-percent finance offers.   You have a pre-established period of time within which to pay off the purchase price with no interest.  Some require a minimum monthly payment; others require full payment by a certain date.  In most cases, a legitimate "zero-interest purchase" requires that the borrower's credit must be in excellent shape.

STOP! THINK!  This is a sales promotion tactic, using a "triggering term" designed to attract your attention and encourage impulse purchases.  The company making this offer is in business to make money.  So, what's the catch?

• Consider whether you reallly need what they are selling in view of your overall financial situation. 
• Will you be able to make the minimum monthly payments or pay the full price before the zero-interest term expires? 
• If you do shop with the company, make sure that the items you want are included in the offer.  Sometimes, the zero-percent is restricted to their discontinued lines, or to clean out old inventory items only.
• Make sure that the pricing on the merchandise is competitive.  Inflated pricing is a good way for the company to offset the loss of interest income.
• Insure that the company is well-established with a good reputation.  If in doubt, check with the Better Business Bureau by visiting www.bbb.org
• Read all the find print.  Remember that the Truth in Lending Act requires disclosure of all interest, fees, finance charges, etc. be presented as an annual percentage rate (APR).
• Find out what the consequences are if you do not make the monthly payments or pay in full by the pre-established expiration date.  The interest on this is often exorbitant and the company doesn't care.  They will only turn it over to a collection agency. 

Always remember that nothing is free and no one is in business to lose money. It's simply up to you to use discipline in your spendign habits and find the best deal for your dollar.