4 “Little Dirty” Free-Loan Tricks That Banks Don’t Want You Know
Advertisements for easy terms loans are tempting. They can be good deals, but you must read the fine print very carefully before you sign up.
1. “Zero Percent Financing” on auto loans
Often these loans are for 12, 24 or 36 months, not the 48 or 60 months many people choose to keep monthly payments down.
If you opt for a shorter loan term, be sure you can make the monthly payments. Also look for any hidden fees.
2. “Zero Percent Interest” on a credit card
These offers usually are for limited purposes and time periods, such as no interest charges for three months on new purchases or on any balance you transfer from another credit card.
This may be a good option, but you’ve got to read all the documentation and do the math.
For example, if you don’t pay the balance by the due date, you will incur interest. Also find out if there’s a balance transfer fee or an annual fee.
These charges could be so high, in fact, that the zero-percent offer may cost more than a card with a higher interest rate but not the other fees.
3. “Add the Closing Costs” to your mortgage
You’re not getting out of paying the closing costs they’re added to the loan balance, so your monthly payments will increase plus you’ll be paying interest on the closing costs.
And, if adding the closing costs to the loan balance results in a down payment on the loan of less than 20 percent of the home’s value, you will have to purchase private mortgage
insurance (PMI), which protects the lender if you stop making mortgage payments.
PMI can cost $80 to $120 per month for the typical mortgage loan.
PMI be cancelled when built-up equity equals at least 20 percent of either the purchase price or the original appraised value, whichever is less.
4. “No Payments on Merchandise Until Next Year”
Even though you won’t make payments for several months, if interest is being charged from the date of purchase, as is often the case, you can end up paying much more for an item than you expected.
Also, if you don’t pay for the merchandise in full by the end of the specified period, you may be charged interest from the date of purchase.
