There are many different reasons why people get into money difficulties
and one day simply find that they can’t manage their debts any longer. Sometimes, they simply live beyond their means, spend too freely and one day find that they cannot service their debt commitments. Other reasons include job loss, either through redundancy or illness, where the debts you build up are based on the need to keep afloat.
These reasons are all fairly well known but there are a number of other ways that you can get into debt and have money problems that aren’t as well known. One of the most common comes from the kind of deal that actually looks to save you money and not cause you money management problems in the first place -- the interest free deal.
We see interest free deals all of the time,
probably every day without realising it. These deals simply allow you to buy something now without having to pay for it on the spot. The interest free deal allows you to buy something and pay for it later, without being charged interest on the money you spend. So, for example, you could buy a new sofa for £750 and get an interest free deal that gives you a year before you need to start paying for it with no interest charges at all.
These deals are basically based on interest free loans although they aren’t always marketed that way so a lot of people don’t view them as being loans at all. And, whilst it is true that they can work really well if you pay back what you owe when you are supposed to, things might not look as great if you can’t do this. There may also be terms and conditions in place that you didn’t think about to start with.
Let’s say, for example, that you are given a year before you start making your sofa repayments. What happens if your circumstances have changed and you can no longer afford the repayments? If you don’t meet your commitments here then you may well be charged interest -- and the interest you could be charged could come in at a phenomenally high rate compared to that given to a standard loan. You may also find that non payment according to your schedule could add interest that is charged for your year’s free interest period into the bargain.
This doesn’t mean that you shouldn’t take advantage of the good deals that you can potentially get here. You simply need to make sure that you read the small print carefully to find out what your commitments will be if things go wrong down the line. This way you’ll avoid paying over the odds for something that you thought came with free finance.
You may also want to start saving towards your repayments as soon as you buy your item. It might be tempting to wait until your interest free period is done and you actually have to start making payments. But, if you put some cash together now, before your first payment is due, then you will be better placed to ride out any problems that a simple change in circumstance might bring you down the line.