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Interest Free Credit. What is the point?


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Last week we went to buy a new 3 piece suite. Everywhere seemed to be offering 4 years interest free credit. But what does that mean?

 

Having cash available we tried to pay without taking up the credit agreement, but were told that the law would not allow a cash discount because of their 4 years free credit offer. So it became sensible to stick the cash in a high interest account and take up the credit offer.

 

So despite wanting to pay up front we got stuck with pages of unnecessary forms to take out credit that we didn't want and didn't need. Isn't this the sort of thing that brought about our current debt problems? Haven't we learned a thing..

 

There is no such thing as free credit. It has to be funded somehow. It seems they expect cash customers to pick up the cost of finance agreements for everyone else.

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Last week we went to buy a new 3 piece suite. Everywhere seemed to be offering 4 years interest free credit. But what does that mean?

 

Having cash available we tried to pay without taking up the credit agreement, but were told that the law would not allow a cash discount because of their 4 years free credit offer. So it became sensible to stick the cash in a high interest account and take up the credit offer.

 

So despite wanting to pay up front we got stuck with pages of unnecessary forms to take out credit that we didn't want and didn't need. Isn't this the sort of thing that brought about our current debt problems? Haven't we learned a thing..

 

There is no such thing as free credit. It has to be funded somehow. It seems they expect cash customers to pick up the cost of finance agreements for everyone else.

 

That seems ridiculous. Would they not accept cash even at the full price?

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I had the same problem a few years ago. The salesman just couldn't grasp why I'd want to use the cash in my wallet to pay for it in one go rather than fill in lots of forms and sign up to a credit agreement and have the cost drip drip out of my bank by direct debit over three years.

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I doubt it, but it is possible if it's in the contract. It'd be sneaky though, and I imagine it is rare.

 

For example: A £500 loan to buy a sofa, 4 years interest free. Payments made at £8 per month leaves £116 left at the end of the interest free period. So there is a profit in it, especially if the interest is quite high after the interest-free ends.

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I was glad of it when we first bought our house, it meant we could afford to stop sitting on the floor! As soon as I had the funds available I just paid off the loan in full, there was no financial penalty for doing so.

 

Couldn't you just pay the tag price in full :huh:

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