QandAs: Loans

What is 0 percent financing?

Answer:
Smart buyers will review their personal credit report

before financing a home or automobile. Banks, credit unions, and other lending institutions place a lot of emphasis on credit scores. Once a person’s credit application is approved, lenders next establish a fair interest rate.

Credit scores greatly impact the interest rate, and anyone who wants to get a low rate on their next purchase ought to practice good credit habits. In fact, an excellent credit score may qualify you for 0 percent financing. Auto lenders occasionally advertise super low rates. Of course, not everyone can qualify for such as great deal. What’s more, 0 percent financing is often temporary.

In many instances, 0 percent financing is a teaser rate necessary to attract customers. Those who qualify for 0 percent financing can take advantage of the low rate for a period of six to 12 months. If they’re able to pay off the purchase within this time frame, they’ll pay zero interest.

On the other hand, if unable to pay off the purchase before the initial rate period concludes, a rate adjustment occurs. It is important to understand that 0 percent financing is conditional. A single late or skipped payment normally voids the agreement, and the lender can rightly increase the interest rate.


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