Expert Advice by Gavin Smith


Interest free finance may sound like a great deal, but if you don’t understand the process, it could end up costing you. Interest free deals have a purpose of luring in customers to purchase products now and pay later with the illusion that it will not cost you anything extra, but this is where many buyers get caught out. 

Interest free finance is when a retailer and finance company come together and provide special offers where you can take products before paying for them. ‘No deposit, 5 years interest free’ are usually the catchlines you will hear when they advertise interest free deals.

What you may not realise is that these offers are in fact a loan. You will be making repayments to pay off the purchase price and although you won’t be paying interest initially, once the interest free period ends, you will be. One of the major dangers of these types of deals is that store cards typically have a higher interest rate compared to the regular credit card. So, if you don’t pay of the amount owing in full before the interest period ends, your repayments will go up. 

Another danger is that because you are applying for credit, the finance company will access your credit report and a hit will be left on the file. This means that when you apply for credit in the future, other lenders will be able to see this and will have to take it into account when assessing your application. 

You may have come across two different types of interest free deals: one where you make regular repayments during the interest free period or you have a deferred repayment option where you do not have to make any repayments until the end of a certain period. Although this may sound like a great deal, many consumers don’t take advantage of these interest free and deferred repayment periods. You should aim to repay the whole amount owing before the interest free period end in order to avoid having to pay a huge amount in interest. 

Interest free finance tips

•    Consider whether you really need to apply for an interest free deal – it is safer to only spend money that you actually have. 

•    Contemplate using lay-by instead

•    Research whether you will be able to afford the repayments when the interest free period ends

•    Aim to repay the full amount before the of the interest free term.

•    Don’t apply for several interest free finance deals. Each time you apply, it will appear on your credit report. Only submit an application with the company you intend to go with.

•    Once you have repaid the amount, cancel the store card.

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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.