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What's the Catch With Zero Interest Loans?
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[QUOTE="Yusra3, post: 339038, member: 31907"] The allure of zero interest loans or credit cards entices many consumers. But financially savvy borrowers understand such appealing short-term incentives frequently carry problematic longer-term traps. Common catches include: [B] Deferred Interest -[/B] Minimum payments due don’t reduce principal debt during the 0% intro period. If any balance remains when normal high interest rates kick in, you suddenly also owe accrued interest retroactively for the entire initial term - an ugly shock. Read fine print! [B] Early Repayment Penalties - [/B]Some 0% loans impose fees if you pay off balances faster than scheduled during the teaser period, reducing incentives to aggressively repay. [B]Low Credit Limits -[/B] Issuers restrict borrowing power to limit appeal of long-term usage. But limited space to transfer/consolidate other debts lowers the overall savings potential. [B]High Origination Fees -[/B] Upfront loan fees negate small or short-term financing deal benefits through immediate reduction of loan proceeds available. [B]Inactivity Fees -[/B] Failing to use some 0% credit cards may incur costly account inactivity charges anyway, frustrating consumers trying to avoid finance costs. Sure 0% financing offers may enable better short-run money management. But ultimately improving long-term borrowing habits and paying down debts faster works smarter. [/QUOTE]
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What's the Catch With Zero Interest Loans?
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