Here are the pros and cons of offers on low interest purchases, as there are some pitfalls to avoid.
TEXAS, USA – With the Federal Reserve poised to start raising interest rates, the days of cheap money may be slipping away for a while.
That means you’ll have to be even smarter about the finance charges you pay. If you have good credit, you’ll easily qualify for long-term interest-free loans with fairly small monthly payments for items like furniture or televisions. But should you?
We asked a professional what he thought about it. Certified Financial Planner Neil Vannoy told 6 News: “Studies show that people tend to spend less when paying for purchases with cash rather than using credit, so make sure you buy something with zero-rate or low-interest financing doesn’t lead to you overspending.”
Remember that even if you don’t have interest, if you spend your hard-earned money on anything other than savings, it’s money in your budget that you can’t save or invest, as Neil explains.
“Don’t just focus on the monthly payment or the interest rate on a purchase; make sure you can actually afford what you’re buying. You’ll lose all the benefits of low-interest or low-interest financing. zero if you end up missing payments or extending payments beyond the repayment date of the special finance offer.”
And if you don’t pay for your new couch on time, you could suddenly owe all that retroactive interest. “Finance offers on things like appliances and furniture have a lot of fine print that you need to be aware of. Paying late or not paying it back by a specific date can result in you owing a ton of interest,” did he declare.
So I had to ask Neil, when it comes to low interest rates, as a financial adviser, is there anything he likes about an extended purchase?
He told 6 News: “Low down payments and low fixed rate financing for a home purchase can be a great option. Personally, if I were to buy a home in the current environment, I would put the least possible and would lock in a rate for 30 years. Mortgage rates are still extremely low by historical standards, and as long as you are buying a home that you can comfortably afford, you can consider paying the minimum for the mortgage and paying the minimum. Invest any extra money in tax-protected accounts like 401(k)s and Roth IRAs for retirement.”
As for sales and deals on furniture?
According to Nerd Wallett, you’ll want to shop around late winter January, February or late August and September for the best deals!