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  • FIRST POST
    • Jonah01
    • By Jonah01 15th Sep 18, 7:26 AM
    • 160Posts
    • 26Thanks
    Jonah01
    Interest free loan
    • #1
    • 15th Sep 18, 7:26 AM
    Interest free loan 15th Sep 18 at 7:26 AM
    Hi,

    Out to get a sofa today. It's about 900. They offer an interest free loan over 1 to 4 years.

    I can pay for it without the loan but was wondering would a loan of such a small amount have a big impact when remortgaging or wanting to borrow more from my mortgage provider.

    Other than the mortgage it would be the only finance on my account.

    Thanks
Page 1
    • zx81
    • By zx81 15th Sep 18, 7:42 AM
    • 18,600 Posts
    • 19,855 Thanks
    zx81
    • #2
    • 15th Sep 18, 7:42 AM
    • #2
    • 15th Sep 18, 7:42 AM
    If you are in the process of hemorrhaging, don't take out any further credit.

    If not, hopefully your affordability isn't on that much of a knife edge for it to matter.
    • Jonah01
    • By Jonah01 15th Sep 18, 9:18 PM
    • 160 Posts
    • 26 Thanks
    Jonah01
    • #3
    • 15th Sep 18, 9:18 PM
    • #3
    • 15th Sep 18, 9:18 PM
    Thanks for your advice
    • Thrugelmir
    • By Thrugelmir 15th Sep 18, 11:58 PM
    • 59,791 Posts
    • 53,130 Thanks
    Thrugelmir
    • #4
    • 15th Sep 18, 11:58 PM
    • #4
    • 15th Sep 18, 11:58 PM
    Out to get a sofa today. It's about 900. They offer an interest free loan over 1 to 4 years.
    Originally posted by Jonah01
    In essence not interest free. The interest being costed into the selling price of the product. Don't get sucked in. Put quality first. Even if it means financing the sofa through another source.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • goodwithsaving
    • By goodwithsaving 16th Sep 18, 12:25 AM
    • 853 Posts
    • 1,319 Thanks
    goodwithsaving
    • #5
    • 16th Sep 18, 12:25 AM
    • #5
    • 16th Sep 18, 12:25 AM
    Hi,

    Out to get a sofa today. It's about 900. They offer an interest free loan over 1 to 4 years.

    I can pay for it without the loan but was wondering would a loan of such a small amount have a big impact when remortgaging or wanting to borrow more from my mortgage provider.

    Other than the mortgage it would be the only finance on my account.

    Thanks
    Originally posted by Jonah01

    If you can pay for something without a loan, why on Earth would you get a loan? I also don't understand finance for sofas, appliances etc but that's just me. Always pay for things outright where possible
    Every time you borrow money, youre robbing your future self. Nathan W. Morris
    • Jonah01
    • By Jonah01 16th Sep 18, 7:28 AM
    • 160 Posts
    • 26 Thanks
    Jonah01
    • #6
    • 16th Sep 18, 7:28 AM
    • #6
    • 16th Sep 18, 7:28 AM
    Why on earth wouldn't you?
    • Catsacor
    • By Catsacor 16th Sep 18, 7:44 AM
    • 61 Posts
    • 55 Thanks
    Catsacor
    • #7
    • 16th Sep 18, 7:44 AM
    • #7
    • 16th Sep 18, 7:44 AM
    If you are in the process of hemorrhaging, don't take out any further credit.

    If not, hopefully your affordability isn't on that much of a knife edge for it to matter.
    Originally posted by zx81

    For heavens sake zx81, he/you should dial 999 instead of asking/answering questions on a forum
    • Catsacor
    • By Catsacor 16th Sep 18, 7:50 AM
    • 61 Posts
    • 55 Thanks
    Catsacor
    • #8
    • 16th Sep 18, 7:50 AM
    • #8
    • 16th Sep 18, 7:50 AM
    Why on earth wouldn't you?
    Originally posted by Jonah01

    Thrugelmir's answer just told you.
    The interest has already been added to the cost of the item.
    • ACG
    • By ACG 16th Sep 18, 8:12 AM
    • 17,495 Posts
    • 9,301 Thanks
    ACG
    • #9
    • 16th Sep 18, 8:12 AM
    • #9
    • 16th Sep 18, 8:12 AM
    With loans, lenders usually take the monthly repayment in to account (rather than the balance). If affordability is a doddle, then it will not matter if you do 1 or 4 years.

    If affordability is tight, then it is probably better to do it over the longer period.

    The loan repayments may have an impact, but just as equally there may be no impact at all, it all depends on the details - which we do not have. Maybe have a play around on an affordability calculator with and without the loan.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Lotak
    • By Lotak 17th Sep 18, 9:26 AM
    • 53 Posts
    • 45 Thanks
    Lotak
    Thrugelmir's answer just told you.
    The interest has already been added to the cost of the item.
    Originally posted by Catsacor
    Am I missing something?
    Whether you pay up front or over 4 years, the net cash outflow is the same? They will charge you 900 today or 18.75 / month for 48 months?
    In that case, it's financially better to pay it over 48 months than upfront.
    Current Debt (excluding mortgage) - 14.9k
    • csgohan4
    • By csgohan4 17th Sep 18, 11:05 AM
    • 4,882 Posts
    • 3,115 Thanks
    csgohan4
    Am I missing something?
    Whether you pay up front or over 4 years, the net cash outflow is the same? They will charge you 900 today or 18.75 / month for 48 months?
    In that case, it's financially better to pay it over 48 months than upfront.
    Originally posted by Lotak






    how do you think they can afford to give you a so called 'interest free' loan? They factored it into the price, plus it may affect affordability as it is debt from a lender's prospective
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • Lotak
    • By Lotak 17th Sep 18, 11:42 AM
    • 53 Posts
    • 45 Thanks
    Lotak
    how do you think they can afford to give you a so called 'interest free' loan? They factored it into the price, plus it may affect affordability as it is debt from a lender's prospective
    Originally posted by csgohan4
    I get that.
    But if you want to buy that sofa from DFS, and it's the only sofa you want and they charge you 900 up front or 18.75 / month for 48 months, then you can't say that paying it up front is a better deal. It is much better to pay in instalments.

    This only works if you can find the exact same sofa from Furniture Village for 850 up front.

    If you have the option of paying something for x up front or paying x/ y per month for y months, it always makes financial sense to do the latter, all things being equal.

    The interest charge might be factored into the price, but it isn't factored out if you pay it up front, so it makes more sense to "pay off the interest" in instalments.
    Current Debt (excluding mortgage) - 14.9k
    • sal_III
    • By sal_III 17th Sep 18, 1:52 PM
    • 644 Posts
    • 657 Thanks
    sal_III
    I get that.
    But if you want to buy that sofa from DFS, and it's the only sofa you want and they charge you 900 up front or 18.75 / month for 48 months, then you can't say that paying it up front is a better deal. It is much better to pay in instalments.

    This only works if you can find the exact same sofa from Furniture Village for 850 up front.

    If you have the option of paying something for x up front or paying x/ y per month for y months, it always makes financial sense to do the latter, all things being equal.

    The interest charge might be factored into the price, but it isn't factored out if you pay it up front, so it makes more sense to "pay off the interest" in instalments.
    Originally posted by Lotak
    The point is that these 900 will "net" you like 45 in today's interests, while having the potential to interfere with your remortgage or another loan/finance of a more substantial amount.

    Then there is the risk that you might be able to afford both the 900 or 18.75/m today, but fall on hard times in the future. If you buy outright now you won't have to worry about one more bill/potential default in this case.

    For most people it's just not worth the risk and hassle over such a small amount. Not all value is monetary.
    • Lotak
    • By Lotak 17th Sep 18, 4:37 PM
    • 53 Posts
    • 45 Thanks
    Lotak
    The point is that these 900 will "net" you like 45 in today's interests, while having the potential to interfere with your remortgage or another loan/finance of a more substantial amount.

    Then there is the risk that you might be able to afford both the 900 or 18.75/m today, but fall on hard times in the future. If you buy outright now you won't have to worry about one more bill/potential default in this case.

    For most people it's just not worth the risk and hassle over such a small amount. Not all value is monetary.
    Originally posted by sal_III
    That I'm not arguing against. Of course it impacts affordability, and one may spend the 900 frivolously, go on hard times and lose their sofa (as you said). For an ultra-sensible consumer, they'd put the 900 away into a savings account and use that balance to pay off the debt. If they need to remortgage and it rests on that 18.75, they can simply repay the rest of the debt and happy days! Obviously that applies to the extreme few.

    But the argument was that the interest free finance wasn't really "interest free", because the interest charge was factored into the price, which I disputed.

    Anyway, I'm a big fan of interest free periods for these sort of products, even if you have the money. It's effectively the same thing as stoozing. You're borrowing money you can afford to pay back, and generating interest from it.
    Current Debt (excluding mortgage) - 14.9k
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