What's Wrong With 0% Financing?

**What's Wrong With 0% Financing?**



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Dietrick asks Dave if it’s ok to finance his furniture set at 0%.

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44 thoughts on “**What's Wrong With 0% Financing?**

  1. Daniel Herrera

    Business are just trying to take any objections away from you not buying. In the case of best buy… you always pay the same in cash or 0% financing.

    Beware: they back charge…but if you have the money…it shouldn't be an issue.

    Reply
  2. Herbivore Challenge

    So if the pricing is built into the 0% and you pay cash then you overpay anyways. I have a hard time understanding why not keep your cash in the bank at a higher interest rate and pay for the car monthly at the 0%?

    Reply
  3. ESponge2000

    I can tell you that Pottery Barn Kids furniture (and I love their stuff and customer service by the way they are a good business I encourage y’all to shop there…with CASH)….. that if you pay CASH or finance not at 0% they give you a LOWER price in the form of what they call a SPECIAL DISCOUNT! OR…. you pay sticker price and get 18 months at Zero Percent where after 18 months if your balance isn’t paid off you get hit with retroactive interest APR back to the purchase date. You see?

    Reply
  4. JDC

    Regardless of interest % or built in interest, when you take a loan you are spending money you haven't even made yet. You are already financially behind. That's the whole point.

    Reply
  5. Randal Colling

    It's always better to simply pay cash. Buy what you can afford at the time. THEN you have NO PAYMENTS! With no payments it's much easier to budget and to build up savings. Then simply invest your savings, while continue to add more to savings and over time you will be rich. ….Your welcome

    Reply
  6. Loathomar

    There are a few clear reasons why companies do these zero percent loans.

    1. To get you to buy the item now. Offering a 90 day 0% interest loan on a $1000 has a cost, but let us say the company can get a loan at rate of 4.5%, over 3 months that is 1.125%, which is $11.25. Even if we ignore the profit from people not paying it off, very few companies would not be happy to lose 1.125% of a sale of a good to make that sale.

    2. Profit off people not paying on time.

    3. The ability to charge more. Car commercial make this VERY clear as they simply give the option "0% financing for 36 months to $2000 cash back". They are telling you, with out question, that it will cost an extra $2k up front for then 0% financing.

    Reply
  7. xsiaze

    I know I will be rich someday, 29 years old and never ever been in debt…everything cash baby..if you can't buy it cash you cant afford it loser !

    Reply
  8. Sadpants McGee

    It is certainly possible that the interest is built into the pricing. It is also possible that you are going to be paying that interest whether you take the "0% financing" or not. If you shop around, you can figure that out, and make an educated decision. I agree that you shouldn't assume that 0% financing is a great deal, but if all other offers lead to the same end cost, I'll take the deferred payments. That way, I can earn interest on that money as I'm paying it out, and keep my emergency fund well stocked instead of cashed out on a new heat pump (which happened to be what I took a 0% financing option on)

    Reply
  9. Iguanaking

    I've made some fantastic purchases from Ebay auctions when they have their >10% bucks deals going and throw it on PayPal 0% financing for 6 months.  Then resell the item later and pay PayPal before the 6 months and make easy money…  I'm not sure why Dave thinks that everyone with a different mindset is brain dead.  There's plenty of things he preaches against that can actually net you a nice little profit if done responsibly.  Using someone else's money on a 0% loan for something to net you profit later is one.  As long as you have emergency capital to pay off the loan before deferred interest if your waiting til a high point in the market to sell, you're golden.

    Reply
  10. mrsparex

    I owned a furniture store. We sold "Catnapper" leather reclining sofas for $899. They cost us $550. We took cash, checks & credit cards. Rooms-to-Go sold the EXACT sofa for $1,199 but with "free" financing!

    Reply
  11. 9914life

    I disagree. If you pay with cash, you still pay the same price. If you finance a car for 5 years with no interest, you are actually getting more for your money because of inflation.

    Reply
  12. Warren Katz

    This guy is a big scam artist .he and the rest of these financial guru's never answer the question what if you dont have the cash to buy a necessity. If you just had a baby and no one to give you money what are supposed to do? Not buy a car seat not buy a crib,etc eyc.
    This is a big difference between buying somthing frivolous and buying a necessity. It's ok for himto sell his books and other stuff ,make a huge profits .but a company that makes a that provides useful products at profit is no good.what a hypocrite.

    Reply
  13. Andrew Leonard

    It's very simple Dave. The department stores, the big box stores, and the furniture stores all get their money right away because they aren't the ones loaning it. There's no special markup. The finance company is betting you'll not have it paid off in time. If you do, you're the winner. Pay $15,000 for a kitchen at 0% interest vs. paying $15,000 cash saves you $333 which you can invest elsewhere. You can't win the don't finance at 0% argument.

    Reply
  14. Brandon Runkle

    Dave, what is wrong with financing for solar equipment? All you are doing is trading your electric bill for a solar payment that is less than what your electric bill was, you have to pay the money anyway. I sell solar

    Reply
  15. mclaren1231000

    That survey question is garbage. Millionaires didn't get rich by taking no interest loans on furniture but they did get rich by negotiating lower interest rates and fees on loans that were critical for there projects and acquisitions. Having 0% interest on a loan increases free cash flow to make investments with, all at a 0% needed return. What the borrower does with that free cash is up to them. They may use the money poorly (negative return) or wisely (greater than 0% return). But to call out 0% financing, in and of itself, as bad is poor financial advice

    Reply
  16. Christopher Liotta

    This was a stupid rant. If the interest is built into the price, you pay for it regardless of whether you finance it or not

    Reply
  17. MrKevMan

    I do 0% when I've almost saved up enough for the item. My payments actually become lower than what I would set aside after I make that first huge payment. I read the terms of agreement. It's not like it's some secret that they hide from you.
    it helps my credit score for when I want to get something big, like property, at a better rate.

    Reply
  18. Manish Lamba

    So Dave needs to be a little more clearer on this. I definitely look at everything I buy as, "Can I pay that with cash today?", minus autos and a home. If I can, I don't believe there should be an issue with taking a 0% finance deal as long as you allocate that money I would have used into an investment or high interest savings account. Companies definitely try the special financing scheme as a way to have you buy the item, but if you already had plans to purchase it without the scheme and have the funds for it, then you probably could come out ahead.

    Reply
  19. Johnny B

    They do work if you can be disciplined enough to be in the 12%. I bought a $1100 set from Bob's, got the 12month interest free. I paid it off in 4mos. I just bought $6500 in furniture from rooms to go. They just wanted a $700 deposit, I gave then $2k instead. Financed the other $4500 5yr 0%. My payments are $75. I've been paying $200 per month instead. Looking to pay it off in under 24mos.

    Reply
  20. Jeanette Armstrong

    Most of the interest is compounded during the time you get to "not make a payment for a year, blah, blah, blah" then a years comes and now you're paying the cost of the item, plus the accumulated interest during that year, PLUS the new interest added to that nice new balance. They get you coming and going. Just pay cash!

    Reply
  21. Eric

    Okay Dave we understand to stay out of debt but enlighten us on increasing income. That is the number 1 wealth building tool, you said it yourself.

    Reply
  22. Steve Kopcial

    Then the consumer is being ripped off, if the item is $3,500 at 0% interest for 3 years and the interest is part of the purchase price of $3,500, if I walk in and pay cash then I am still paying interest on a cash sale as the purchase price is the same rather you pay cash or 3 year interest free loan. Hope this makes sense.

    Reply
  23. James Marquis

    Dear Detrick, here are 4 other options.
    #1. Go to a thrift store and buy your furniture for pennies on the dollar
    #2. Get on Craigslist and buy or get FREE (!!!) furniture.
    #3. Keep a eye out for FREE furniture sitting at the curb.
    #4. Check craigslist and your local classifieds for moving sales.

    Reply
  24. I got 5 on it

    That 12% is the people that should have credit cards… if you have a gun and you're careful you eat snakes for dinner instead of let them bite you..

    Reply
  25. On Point Travel

    A person that say has $400,000 with no debt and wanted to buy a $400,000 house at a negotiated rate and was offered 0% (not impossible with Family) interest for 15 or 30 years take it!!! Ramsey would say pay cash. No good argument not to take the 0% financing in this situation, sorry

    Reply
  26. On Point Travel

    Nobody thinks you are going to get rich by borrowing money at any rate. I hate that argument! 
    I would like to know the stats on millionaires that would accept 0% interest opposed to deny 0% interest.
    Great argument is "playing with snakes", That is for real. Another great argument is you will likely spend more because it's financing at 0%.

    Reply

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