Is interest free credit a good idea??

bobmonkeydog

Hi Everyone

My partner and I are buying new bedroom furtniture. We have chosen a set we like for £800 and have been offered 3 yrs interest free. Initially I was against this but the more I think about it themore sense it makes for the following reasons -

• We have the £800 in our savings so we are not spending money we don't have
• The payments will be very low - approx £22 per month
• Our savings can gain a bit of interest over 3 yrs
• There is no difference in cash price to Interest free credit free price.

Does anyone have any views on this?? Is it a good idea or should I steer clear.

Thanks

:j

burnsy89

do a bit of stoozing - if it's interest free then you might as well put the money in a savings account and make some interest on it. maybe a fixed rate ISA or something where the money is tied up so you're not tempted to spend it

eschaton

At the end of the day, making any interest on it is better than nothing.

Although, I don't know if I could be bothered with the hassle for so little reward.

bobmonkeydog

Thanks for replies. Think we are gonna g oahead and do it. We won't spend our savings although it is nice to know that the money is there in case ofan emergency etc.

charleyroo

If it were me I would just pay for it. The interest on £800 is going to be negligible, isn't it?

And I'd hate the thought of that £800 being there, ready to spend on something else, and then an extra tie/outgoing a month as well.

Only an opinion though - after all, the interest free isn't costing you anything and you are getting something out of it. Maybe take it out over a lesser term so you aren't in such a commitment? (I know £22 per month isn't much of one... but still!)

You've got me doing a little debate in my head, haha!

InsideInsurance

Why wouldn't you want interest free? There is a strong argument that with places that offer it for free on everything then effectively the cost of interest is built into the price of what your buying and by not taking it your paying above what you should be for the item.

Only if your wanting to reduce your existing debts for some reason would you reject the offer.

bobmonkeydog

Glad that I have provoked some debate lol!!

I reckon I could make about £70 interest on the £800 over 3 yrs in my ISA which isn't a lot but I guess is better than nothing!!

eschaton

bobmonkeydog wrote: »

Glad that I have provoked some debate lol!!

I reckon I could make about £70 interest on the £800 over 3 yrs in my ISA which isn't a lot but I guess is better than nothing!!

What rate are you getting in your ISA to make that amount? I thought about £35 which is why I said it wasn't really worth the hassle.

YorkshireBoy

bobmonkeydog wrote: »

I reckon I could make about £70 interest on the £800 over 3 yrs in my ISA which isn't a lot but I guess is better than nothing!!

Except you won't have £800 for 3 years. It'll depreciate as you make your repayments.

Your average savings account balance over the 3 years will be £400, so that's a (70 / 400 x 100 17.5% return...well over 5% a year.

If you can find such a rate, please let me know.

If I was you I'd plan on 3%, so around (400 x 0.03 £12 a year gross.

eschaton

YorkshireBoy wrote: »

Except you won't have £800 for 3 years. It'll depreciate as you make your repayments.

Your average savings account balance over the 3 years will be £400, so that's a (70 / 400 x 100 17.5% return...well over 5% a year.

If you can find such a rate, please let me know.

If I was you I'd plan on 3%, so around (400 x 0.03 £12 a year gross.

Exactly what I thought in my post above - unless there is this near 6% rate and I want to know too

bobmonkeydog

I didn't take the depreciation into account. I was just working on the interest I will earn on the £800 over the course of the 3 years in my ISA at 3% - just over £74.

I wouldn't make any interest if I simply paid the bill in full unless I saved the £22 monthly payment for 3 years which is unlilkely!!