In a nutshell, 0% loans are loans for which you have to repay only the principal amount. You are exempt from the associated charges and interest. Considering this, customers understandably gravitate to these loans. However, these loans do not come with a “no strings attached” deal. Lending institutions offer these loans to applicants who have a fantastic credit score and credit record. Most lenders require you to have a credit score of 720 and above.
If your application for a 0% loan is approved, you ought to ensure you follow all the stipulated terms and conditions. If these terms and conditions are not met, you could be expected to pay a hefty penalty. Furthermore, delayed payments, missed deadlines, and not paying the entire amount can all reflect poorly on your credit record and hinder your chances of getting future loan approvals. Be sure to check the eligibility criteria and the hidden charges before applying for a 0% loan.
Are you Eligible for a 0% Loan?
Before you apply for a 0% loan, be sure to check if you are eligible for it. Here are the conditions you need to meet –
- The applicant has to be above the age of 25
- The applicant ought to be a resident of the UK
- The applicant must have a credit score that is well above 720
- The applicant ought to ensure a steady source of income Additional documentation must be presented if the applicant is self-employed
- The applicant needs to ensure they have the net income stipulated by the lender. The lender usually requires the applicant to submit the latest salary slip. It has to be at least equal to the minimum salary required for the approval of the 0% loans
- The applicant must not have any cheque return history over the last six months
When can you Avail a 0% loan?
Assuming all the necessary documents are submitted, it usually takes 0% loan 48 hours to get approved.
A relatively bigger loan amount that companies and businesses generally apply for will take longer. This is because a detailed analysis of documentation will have to be done, which means that processing the loan will take more time.
On the off-chance that your documents are missing, lenders can hold off on approving your 0% loan. Borrowers should find out which documents are needed to have a seamless loan approval process. Before availing a 0% loan, ask yourself the following questions:
- Do you need to borrow?
If you decide you need to borrow money, try to borrow as less as you can.
- Is this loan for a planned purchase?
It is advisable to borrow a loan only as a last resort for a planned purchase.
- Is this affordable?
If you cannot afford to repay the loan, borrowing money is futile. If you are not able to make repayments on time, your credit score will get affected negatively.
- Are you offered loans at high rates of interest?
This may be because your lenders think you are a financial risk after having evaluated your financial history.
While 0% loans do not require you to pay interest, there is a deadline by which you have to make the repayments, failing which you will be subject to interest.
A 0% loan’s Associated Charges
While 0% loans may seem like the ideal loans to apply for, keep in mind that there may be associated hidden charges.
In the case of a skipped payment, the credit reverts to a standard loan and the interest associated with 0% loan, which had initially been wavered off is now added on to the standard loan.
Another hidden charge is the transaction fee that will be charged when money is transferred from a regular credit card to a zero-interest credit card.
In the UK, this can prove to be an issue for customers who tend to transfer small amounts from one account to another regularly.
Some people tend to spend lavishly. They often spend more money than they can afford to repay, which leads to a vicious cycle of debt, thereby having to pay the bank an ever-increasing rate of interest.
Where can you get 0% loans?
0% loans are more accessible than you might think. These are sources of 0% loans that you ought to consider –
- Retailers of Electronics and Furniture
If you plan on buying a new TV or a sofa, retailers are generally willing to offer you excellent deals on 0% loans. This works out well for both the retailers and customers. Everyone benefits so long as the payments are made on time.
- Medical Providers
Some medical providers support the scheme, as a result of which some banks tend to offer you 0% loans on medical care.
- Car Dealers
Car dealers may offer you a 0% loan while purchasing a new car, provided you have a credit score that is well above average. Keep in mind that these loans are usually offered during the promotional period.
The entire loan is not interest-free. You do not have to pay interest during a specific period. As appealing as they are, 0% loans may not be the best option for you because you may have to sacrifice some other perks that the manufacturer offers you.