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Using the No Deposit/No Interest deals to YOUR advantage
by Greg Smith
To keep you buying, retailers have come up many clever concepts but the one concept that's really making some noise is the 'buy now pay later' concept. Nearly every time you see an ad or pass by a large retailer you'll probably see the tag lines like "No Deposit No interest for 18 months", "Nothing to pay for 6 months" or "Interest free" splashed everywhere.
Whilst it all sounds great to use someone else's money to buy things it sometimes has a nasty catch if you are not careful. With some of these deals you could end up paying an interest rate of between 20 to 24% interest. That's right! 20 to 24% interest!! That's about two and half times the current standard personal loan rate.
No deposit no interest deals are simply another form of credit which have been devised by retailers to assist the customer to buy now take the goods with them and pay in instalments over an agreed time period. In a way, it has replaced the good old Lay Buy concept where you could only get the goods after you have paid the full amount. In many instances the credit provided for the buy now pay later deals is through third party money lenders like, GE Capital who have an arrangement with the retailer to offer credit, however they deal directly with you to provide the money. Some retailers like Harvey Norman also have their own finance company (Harvey Norman Financial Services).
To get one of these deals you must go through the same process as getting a loan from a bank or a credit union. They ask you the same sort of questions (like income, expenses, occupation, other loans etc) and then they do a credit reference check on you. Some may even require you to provide some sort of security or a guarantee when you apply. If all is approved you then enter into what's called a Credit Contract which is a binding legal agreement between yourself and the money lending company.
Whatever you do, Don't sign up until you have read all of the documentation - ask them to explain the contract in detail pointing out what is expected from you and what may happen if you somehow default. With many of the interest free deals the interest is born by the retailer. Many of them absorb this as a cost of marketing so that they can get the sale now rather than later.
If you pay on time this can be a great way to buy things. However, if you default or go over the interest free period you may end up paying 20 to 28% on the balance owing. Worst still some deals actually penalise you for defaulting by backdating the interest (usually at 20 - 28%) to the original date of purchase. That can be a killer!!! With the interest free offers they may want a deposit of say 10 - 30%, so be careful not to think that because it is interest free it is also deposit free. With some deals also watch out for the monthly processing fees as they can creep in without you noticing them.
If you encounter money problems during your contract the first thing you should do is call the company you have the Credit Contract with and talk to them about alternative arrangements. It is better to do this before they come looking for you.
If you are considering using any one of the buy now pay later deals here's a list of the top ten things to do:
1. Read the contract documentation carefully - if they don't have any think twice.
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