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How 0% Financing on Home Improvement Loans Work

Back in June, I penned an article where I warned that consumers should be wary of 0% financing offers [3]. I wrote that post because oftentimes (I would almost go as far as saying always but universal statements always come back to haunt you) deferred interest continues to accrue even though the loan balance doesn’t change. Well, my same as cash loan [4] (for my windows and sliding door replacements) paperwork just came in, financed by GE Money Bank, and it’s just as I expected. I have $0 in monthly payments for six months but deferred finance charges continue to accrue at an annual percentage rate of 18.24%. If I don’t pay off my home improvement loan before the promotional period, I’ll have to pay $2,944.30 in deferred interest. Windows and doors that I purchased for $7,000 (great deal!) would actually be $9,944.30 (ho-hum deal!).

This same paradigm applies for any 0% promotional financing offer out there – so unless you’re able to pay off the full price before the promotional period (or you can secure better rates), you’re better off not taking the promotional offer because of its awful rate (18.24%!). If you have the cash on hand, you can stick that money into a high yield savings account [5] and treat it like a 6 month balance transfer.