Would you do it.

Would you take out  a 0% loan for something you were already going to buy? 

If so, why?

If no, why not?

Discuss.

39 thoughts on “Would you do it.

  1. I’ll go first. I pick both. Haha.

    I signed up to take on a 0% financing offer for Girl Ninja’s engagement ring. Figured I could either spend thousands up front, or spend the same amount over 12 months. Why not take the 0% offer?

    Well part of me was scared there would be some weird restrictions or fees for paying debt off in 12 months (CC terms aren’t the easiest to make sense of). But an even bigger part of me felt lame proposing to GN with a ring I didn’t actually own or pay for. I decided to close my 0% account and buy the ring with cash.

    So, no I’m not opposed to 0% offers, and may dabble with one in the future, but I also don’t really think the 0.8% interest my savings account earns is a strong argument for utilizing 0% debt to improve my finances.

  2. No because one of the best things about not having debt is not having to worry about payments. I like that I can spend money on bills or not every so often since I’m a payment ahead on everything (except the mortgage which you can’t pay ahead). My ‘bill paying’ on payday is a lot of gleeful transfers to savings accounts. It’s awesome. Bills suck.

  3. You know how wealth can be broken down into “Old Money” and “New Money.” Old Money is filthy rich but does not have to broadcast that they are filthy rich. New Money tries to impresses with monster houses and rooms full of cars. I sort of pretend I am Old Money (I am neither, just frugal) and quietly live my life of no debt. Once the great feelings I have about having my finances in order is that I can pay cash for purchases and not worry. Just like Old Money,.

  4. Absolutely yes. I recently purchased a new Dell computer for $1200 with 12 months to pay at 0%. Obviously Dell is hoping to prey upon those who can’t pay their entire balance within that period. But I am paying off the machine in 4 installments of $300 each. It does not make the slightest difference financially if I make 1 payment of $1200, 3 payments of $400, or 12 payments of $100; there is only the psychological satisfaction some may experience (I do not) of feeling that one is not carrying debt. But so long as I’m within the 12-month period, I do not have the slightest objection to making cash flow easier by paying over a longer term.

  5. Funny you ask. We just financed the purchase of our new HVAC system. 0% for 36 months. We could have paid cash for the system but figured it was more important for us to continue growing our emergency funds. Will it be a pain to pay another bill…sure. However it’s not like I am bill free, still got cell, cable, Internet, mortgage, HOA, insurance etc.

  6. The only problem I see with getting stuff at 0% is you cannot see the future. What if you lose your job? What if you get into a wreck and need that money for medical expenses? I have bought tons of stuff on 0% interest, but lately I have been thinking that I want to be free.

  7. I probably would since if I am buying it I could pay for it now anyways. Might as well earn a pathetic interest rate on my money in the mean time.

  8. Absolutely. I’ve done that many, many times, especially with 0% intro offers on credit cards. Why? Simple math: I have my budget, and when I purchase something, it gets recorded. Even if it’s a 0% card, it still gets recorded, so I know how much I have. If my records say I have $5K in savings, then I have $5K in savings, even though my actual numbers might be $25K in the bank, $20K in 0% balances.

    I also have the dates written down when they need to be paid off by. Never paid a cent of credit card interest in my life, and (knock on wood) never will. If you have the money in the bank, the financial discipline to know that the money in the bank is already “spent”, and the memory to be sure to pay it off on the correct date, it’s an absolute no-brainer.

  9. I do as long as there is no prepayment penalty.

    I purchased my last computer using two 0% financing offers. My company offers an interest free loan of up to $2,000 for the purchase of a computer and related software and hardware. The loan is 0% interest and is paid back through payroll withdrawal over two years – at which point you are eligible for another loan. If you leave the company before the term, the full amount comes out of your last paycheck – that is the only concern, I then used an 18 month financing offer from Best Buy to purchase the computer. I dumped the loan proceeds into an 18 month cd and made minimum payments until the cd matured and then paid the balance in full. This was back when I was able to get 3% interest on the cd – made $90 on interest.

    I also bought my car with a 60 month 0% financing offer. I had the cash to make a significant down payment and was planning to finance the rest. When the dealer offered 0% interest for 60 months (for some reason shorter terms had interest rates) and no prepayment penalty, I decided to drop the down payment to the minimum necessary to acquire the loan ($100) and used the rest of the down payment to knock a large chunk off of my student loans – an instant return of 8%. This was more recently when playing games with keeping the funds in cd’s would only have netted 0.75%

    The conditions I have on accepting 0% offers are:
    1. Must be no penalty for prepaying the debt.
    2. Must either be able to get a high rate of return immediately (pay off a higher rate debt – mortgage or student loan) or have little impact on my short-term cash flow (<24 months) and be easy to schedule the payoff transactions far in advance.

  10. Yes! I’m currently trying to rebuild my credit after some crappy decisions in college. If I could have 0% interest and make payments on, say a new computer, I’d totally do that.

  11. Absolutely. The key thing to stress is whether or not the funds are available. If you have the funds to pay for it out-right, I like maintaining liquidity by paying it off over time. The wife and I recently financed a kitchen remodel through HD with a 0% 12 month plan. The payments were budgeted every month and we were able to maintain our savings balance (plus interest).

    I understand the psychology of not having debt, but there’s no risk as long as funds are available.

  12. Yes. Actually I did this about 2 weeks ago. I bought my wedding dress (and accessories) with a 12 month 0% interest offer. We have the cash in savings, but I’m not ready to part with that yet. Having the 0% interest offer keeps us more liquid. I’m making the payments out of our discretionary money each month. This way I’ll end up paying for the dress with money that would have just been “wasted” on eating out or shopping anyway

  13. That’s a no brainer. I can make 15% by investing the money that I would otherwise have been out of pocket.

  14. Yes, because of the opportunity to do three things.
    1. Pay with inflation adjusted dollars to the tune of1-3% per year
    2. The ability to invest the funds in the interim
    3. Build credit and increase your scores

  15. No, I don’t like to have debt anymore. So if I could pay for it, I would.

    It’s purely a mental thing not necessarily the right answer from a financial standpoint.

  16. We just did this recently. We bought a car. The loan was 0%. I have the money to pay for it but I’d rather hold onto that money. Down the line I may pay it off early but at 200/mo I’m in no rush.

  17. I have used 0% loans to buy things at Best Buy before. It’s very handy. I think it’s important to know that you COULD pay cash now if you wanted to, but I did like spreading my cashflow out over the year. I still pay it off within 10 months JUST IN CASE they try something screwy, but so far haven’t had a problem. So two rules I have to using 0% loans:
    1. Only buy it if you really COULD pay all upfront now.
    2. Pay it off within 10 months instead of 12 just to be sure you don’t get hit with the interest charges.

  18. It depends. If I had the money to make the purchase outright, no. I hate having payments on anything; I hate having to spend my monthly income that way. If I didn’t, and there were no restrictions, then yes, if I knew I could make the payments without any problems, and be paid in full at least 3 months prior to the end of the financing period.

  19. As long as I had the cash to pay it off immediately—no. We’re about to pop out a baby, and the last thing I want to worry about it one more place to make payments to. If we had more time to try to invest the money and then make sure it was paid off by the time the financing period ended—maybe. Right now I wouldn’t want to make my life more complicated.

  20. If the money was already in the bank and earmarked for that expense, maybe. But I just don’t like having payments, so I might just ask for a paid-in-full discount instead. Might be more money saved that way.

    In fact, we bought an expensive mattress last year and they offered 0% financing…OR 10% off if paid upfront. We paid upfront and saved way more than we would have if the money was sitting in the bank.

    • This is our strategy! We’re getting 5% off our new roof for paying cash. That’s more money saved by paying up front than interest we could earn in a MMA or CD right now. Cash is king!

  21. No. You never know what’s going to happen, and having no payments allows you flexibility. If we can’t afford to pay cash we wait until we can.

  22. That’s similar to what we’re currently doing with student loans- accepting the ones with deferred interest, even though we have the money to pay for them. I’m sticking the loan money in cd’s so I know exactly where it is (and no temptation to spend it) & we’ll pay back the loans once the deferrment period ends. Won’t make a lot of money with interest rates being so low, but a little is nice.

  23. I did take out a 0% loan for a refrigerator. I am paying a monthly amount to pay it off in a little less than the deadline. It is free money and I might as well take advantage of it. If they offered a cash discount I would have paid it upfront.

  24. We pretty much did this with my sons kindergarten. We were going to pay off 1k all at once but then we found out we get no benefit from doing this. So we went with the monthly payments(which do not have any interest added). I will let the money sit in my accounts and collect interest.

  25. I have twice taken advantage of such offers. Once a few years ago for a new entertainment center and again recently for new kitchen appliances as we are remodeling our kitchen.

    In both cases, I took advantage of holding onto my own money (I could have paid in full in cash in both cases) and allowing it to grow. With 0% over 12 months, I aim to pay off in 10 months so I can see at least one monthly statement with a zero balance b/c I can do math and see the real danger of not paying off in time.

    For the kitchen, we are writing so many large checks that it is reassuring to delaying the appliance payments until the project is all said and done.

  26. My take: Why not?

    The answer ultimately depends on the hassle factor, however. Is the admin involved going to make it worth the extra interest I can earn by holding onto that cash?

  27. I say yes if you have the money to back up the debt. If I’m going to buy a car and I can finance it at 0% for 24 months, I will, IF and only IF I have the money in the bank to pay off the loan immediately during those 24 months.

    Borrowing money to pay for something you can’t afford is silly if it’s 0% or 3%. This is why I hate my mortgage so much.

  28. No. Debt at 0% is still debt. And I $#@@&$! hate debt. Debt=risk. I’m not taking any more loans, ever.

  29. I would like to say no, but I am essentially doing that now.

    My subsidized student loans are deferred currently, so they are essentially a 0% loan. We have the money to pay them off but have decided to invest it in the intervening years. So far it’s going well. It wasn’t my intention to do this when I first took out the loans but that’s how it worked out.

    I don’t think I would do the same for consumer debt, though. I don’t like the idea of buying something I can’t afford to pay cash for or taking the risk of having the terms of the debt go awry against me.

  30. No. I prefer to save for 12 months and then pay the full price at once than taking a loan and then getting stressed to paying it off. Haha That’s what works for me. 😛

  31. Right now, I can’t see doing that for any purchase under about ~2k. I don’t want to worry about future cash flow issues. I’m the same way with other kinds of bills – pay them immediately, in full – or I’m scared I would forget. I’m fortunate to have a more than sufficient emergency fund that lets me do that.

    Now, if my car unexpectedly died tomorrow, and I had to replace it, then I wouldn’t want to take the huge liquidity hit all at once and would consider the 0% loan.

  32. I would for the sake of my credit score. It’s on the cusp of Very Good / Excellent, and I know I get dinged for not having a “variety” of debt (just a CC I pay in full every month).

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