When you are in the market looking for a car loan, you would have come across lenders and dealers offering credit with zero percent interest. In other words, you have the pay the exact value of the car, throughout the loan.
However, you tend to feel this deal is too good to be true because why would any financial institution provide these types of offers. Here is all you need to know on zero percent car loans:
What are the advantages of zero percent car loans?
The biggest advantage of these types of car loans is that you don’t have to pay any interest for taking credit. As a result, you can save large sums of money in the long run. Here is an example, which will give you an idea of why a zero percent car loan is popular among consumers. If you take $20,000 as credit for five years with no interest, the monthly payments will amount to $333.33.
However, if the same loan has a five percent interest rate, the monthly payments increase to $377.42. Over the duration of the auto loan, you will pay $2,645.48 as interest. If you can save this amount, you can use it to improve your house or purchase third-party accessories for your vehicle.
Are there any catches to this deal?
The primary reason why lenders and dealers offer this deal to consumers is that they want to sell vehicles that don’t have a good sales figure in the market. Sometimes, financial institutions make this offer available to those who have good credit scores.
To avoid putting yourself in this situation, you should get in touch with the lenders and dealers and find out if you are eligible for a zero percent car loan. When you opt for this type of credit, make sure it is a vehicle that meets your requirements. You should never go for this deal, just because it helps you save on interest. Make it a point to test drive the vehicle, before you purchase it.
Before you sign the loan documents, make sure you go through the fine print properly!