I’m sure you’ve seen these traps advertised on TV or radio. Most of the time it sounds like the guy is going to come unglued unless you run right down and sign up. The fact is, they are trying to trap you. These sales are designed to get you to spend money on things you don’t need and in the end trap you into much more interest than in which you bargained.
When I was in my spendaholic younger days, I fell victim to their trap. I bought a stereo at one of these big box electronic stores promising ‘zero percent financing’ for six months. Even though they got me to spend money I probably shouldn’t have been spending; I didn’t fall entirely into their trap.
I did manage to squeak out without paying any financing, but I did end up with a stereo I didn’t end up using very much, and I could have been just as happy with my much older and more compact unit. So, here are four useful tips to keep you from getting sucked into their trap.
Financing Tips #1 | They use the ‘zero percent financing’ rate to trap you into making purchases you don’t need.
Ah, the thought of having something brand new, not having to pay for it for a while, and incurring no financing charges, seems too good to be true. The fact is this is the trap they are offering to get you to spend money you don’t have and sometimes to get you to buy something you don’t need. I fell into this, sort of, back in the nineties with a new stereo system.
I wanted one, but it was way back in the back of my mind. I looked at some prices. I decided I didn’t have the money, so it was way on the back of my mind. Then I heard one of those ads.
You know, something like Screaming Charlie telling me to come on down and get a new stereo ‘today only’ at ‘zero percent financing for six months.’ Ok, I’ll bite. I went down to Screaming Charlies and picked up my stereo. I asked a ton of questions, and that is when I became fully aware of the type of trap they were trying to lay.
I fell into the trap of getting something I didn’t need or wanted that badly. But, the good news is I didn’t end up paying any finance charges. That’s a whole other part of the equation.
Financing Tips #2 | If you don’t pay it off in full you are responsible for all the interest.
You need to watch the fine print. Many of these ‘zero percent financing’ offers come with loopholes if you don’t pay them off in the specified amount of time. The one I had was a zero-percent offer for six months. If I didn’t pay off the item in full after six months, I was responsible for all the interest for the entire six months at the full price of the item.
What this means is, that if I bought the stereo for $500 and made payment, but didn’t manage to pay off the item in full, I was responsible for interest at the full $500 price of the item. And, I believe they figured the interest monthly. Monthly interest meant I would be paying compounding monthly interest on it.
And, if I remember right, the interest rate was not too gentle. Screaming Charlie tried to make it seem like they wanted to be my friend by selling me the stereo. But if I missed paying it in full, they didn’t want to be my friend anymore.
The good news is, that I did pay off the stereo early and avoided any interest charges. You should be aware that retailers write these exceptions into the agreements, so if you do get into a zero-percent financing deal know the deal.
Financing Tips #3 | Prices may be elevated or not as negotiable as before or after the sale.
The companies that offer these deals aren’t going to lose money. Another tactic they use is to raise the price before the offer begins or they may not want to negotiate the deal as much as they usually would. For most of these retailers, you can go in and negotiate a discount on the items. The items they put on the zero percent program; might not be as negotiable.
They feel they are giving such a great deal by offering for you not to pay any financing charges, negotiating a better price might be out. In the long run, you would be better off saving the cash and going in to negotiate a cash deal without the financing. You will be paying less.
Financing Tips #4 | Read the fine print.
In many cases, the advertising of low or no interest rates is there to lure you in and is times not available on all units. If you are there for a particular model and they do not extend the zero rate to that model, keep shopping. These sales are designed to make money off of you. They are not intended to save you a bunch of money by losing the store a bunch of money.
Most stores won’t offer zero financing on some of their best units. Some stores draw you in with the promise of zero percent financing, then show you the much ‘better’ unit where zero financing isn’t available. Just remember, don’t get caught up in the ‘you have to buy today’ trap. If the deal doesn’t feel right, don’t be afraid to walk out.
If you need something, I’d recommend doing it the old-fashioned way and saving up and going out to negotiate the best deal. I think you could be getting a better price if you don’t even get involved with these zero-percent financing deals. This is just part of having a good financial mindset.
This is the typical type of idea I share on my mailing list. My mailing list is just a bunch of like-minded people who want to get financially free and design the type of life they want to live. Most people’s lives revolve around their job. I think this is wrong. Our lives should revolve around what we value the most, and our work should fit into that scheme.
Do you want to spend the majority of your time with your family, create a life to do that. Do you want to spend your time traveling the world, and build your life around that?
Till next time, be safe,
Kevin