Is Interest Free Credit Worth Taking Out?

Although it is less common these days, there are still some companies that offer interest free credit. This means that they will allow you to purchase something and not pay for it for a certain amount of time. The way it works can vary depending on the item and the company. It may be that you will be required to pay a small amount each month and then after the interest free credit period, you will either have to pay off the money that is owed or you will have to start paying interest on it.

If you are buying an item, such as a car or white good using interest free credit, then it is worth comparing prices before you do. As the loan is free, it could mean that the items you are buying are more expensive to incorporate the cost of the loan. Compare the prices with other places and if you do need to borrow money to buy it, you could find that getting a personal loan and buying the cheaper item could work out cheaper than using the interest free credit on offer. It is worth doing the calculations to see whether it is a good idea.

It is really sensible to look carefully at the terms of the loan as well. You may find that the interest free period is limited and that after a certain time you will start being charged interest. It is important to be aware of when this will be so that you can make sure that you are prepared. Try to have the money available to pay off the loan so that you can avoid being charged the interest as it can be very high. You may also find that if you miss a repayment it is very expensive, make sure that you are aware of how much the charges will be and use that as motivation to make sure that you always make sure that you have enough money to pay it.

Another possibility is an interest free credit card. These are hard to find and less common than they used to be. They often have a short interest free period, perhaps up to a year. They work so that you can spend on them up to your credit limit and only have to pay a minimum amount each month to mainly just cover the interest. Then you will start being charged interest, probably at their standard variable rate, after the interest free period ends. Although this is great to get an interest free period, once this is up, then you could end up paying a lot in interest. You could end up paying more this way, than if you got a conventional credit card which might have a lower interest rate.

Some people take out an interest free credit card or a fast cash loan and use it to buy all of their normal shopping such as food and fuel and then take advantage of not having to pay for it for the interest free period. They save up the money that they would have spent on it and then get interest on it and then pay off the credit card just before the interest free period comes to an end. This means that they benefit from getting some interest. These days, with interest rates so low, this is not so beneficial, but it can still make more money than not doing it at all. You do need to be careful though as you need to make sure that you are self-disciplined enough to make sure that you do save the money. If you use the card and cannot pay it off at the end of the interest free period then you could end up having to pay a lot in interest and this could cost you a lot more money than you gain in savings interest. So only do this if you can be completely sure that you will be able to pay off the card at the end of the interest free period.

So although interest free credit can be a great thing, it is important to make sure that you are getting the best possible deal. Check and compare what is around and make sure that you are fully aware of the terms and conditions before you go ahead with it.

Should I negotiate a Bigger Overdraft?

Most of us have an overdraft associated with our current account. This allows us to borrow some money if we need it. It can be a very quick way to get some extra money if we run out. The overdraft will have interest charged on it as soon as you use it and it will be paid off automatically when money gets paid into the current account. An unauthorised overdraft is the same except that the bank have not approved it. This means that if you borrow more than they have approved, you will be charged extra money for doing so. The interest rate is usually higher for an unauthorised overdraft and there are likely to be additional charges as well.

To reduce the risk of having an unauthorised overdraft and being charged an extra amount it may seem to make sense to negotiate a larger overdraft. If you over borrow more money than you have agreed then getting a larger authorised overdraft will mean that you can continue to do this at a lower cost. Therefore it could save you a significant amount of money.

However, having a larger overdraft means that you may be tempted to borrow more money on a regular basis. Of course, an overdraft is there so that you can do this. It can be great for emergencies, if you do not quite manage to make ends meet at the end of the month or have an unexpected bill. However, it can also mean that you are less careful with your spending.

This is because if you know that you have this buffer you may not budget so well with your spending. You may feel that as you have the overdraft to fall back on then you will be able to spend more money and not worry so much. It is lovely to have the feeling of freedom and security of knowing that you have that money as a backup. However, it is worth considering how much extra it costs to use the overdraft. It can be an expensive way to spend money. Think about how much more you are paying for things if you include the cost of the overdraft and then you can decide whether you think that it is worth using it or not.

If you keep a close check on how much money you have in your account and how much you have to spend for the month this can help. Having all of your bills going out just after you are paid so that you know that what you have left will cover your variable spending for the rest of the month, such as food and travel expenses, then you should be able to spend carefully and make sure that you do not go overdrawn. It is wise to make sure that you keep checking how much money you have in your account so that you know whether you can afford to spend more money or not. You might be able to cut down what you are buying or delay buying it until you next get paid if you know that you are short of money. It can seem like a nuisance doing this but it can save you a lot of money. You will soon get used to it as well and it will mean that you can spend money without worrying about getting overdrawn so often.

If you do find that you are getting overdrawn a lot then it is worth thinking about whether you need to change the way that you are spending money so that you can stop doing it. It could be that you need to see if you can find a way to earn more money or that you need to find a way to spend less. It is not always easy doing this, but it can be worth it because it means that you will no longer be paying out the interest and fees for being overdrawn. It could even mean that you will start to have enough money so that you can save some. Then if you do get into trouble making ends meet you will be able to fall back on those savings rather than using your overdraft, but it will still be there just in case you really need it.