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Be careful with the zero percent financing

0% financing

At first glance, it sounds fair, transparent and convenient: The zero percent financing. In particular, larger furniture stores or electronics stores offer their customers credit for certain products or for a limited period of time. But nobody has anything to give away. Every company has to work economically. With a loan that is actually granted interest-free, a lender would lose money. The zero percent financing is often just a clever marketing concept to attract more customers to the branch and to increase sales.

With financing for 0% interest, dealers can certainly gain the desired attention from their target group. Many consumers are seduced by advertising slogans such as “0% on everything” or “0% technology financing” and buy products that they might not have needed at the moment - with the thought in the back of their minds that they have made an unbeatable deal . On the demand side, the bill seems to be paying off for retailers. But what about the provider side? How can the zero percent credit pay off for the retailer?

There are various levers that traders can turn in such promotions. The first factor is the waiver of the finder's fee that the merchant would receive from the lending bank under normal conditions. The lending interest, on which the bank would earn, is paid by the dealer either from his advertising budget or the dealer and the bank share the remaining interest income. For the retailer, zero percent financing ultimately represents just another type of “discount campaign”. For the bank, the business often pays off due to the significantly higher volume of loan agreements that come about through such advertising.

A second point is the product price. In fact, it has already been observed that the price of the product that is advertised with zero percent financing is raised shortly before the campaign or - if it is a new product - goes on the market at a slightly higher price than at it is the case with other dealers. In this way, the retailer recovers the missing interest income or the resulting costs indirectly via the slightly higher product price. Tip: With the help of price comparison apps for smartphones, you can use the barcode in the store to find out which retailer has the cheapest price for the product in question.

Not to be underestimated are the customer data that is extremely valuable for the retailer and that is collected with every purchase or loan agreement. The dealer may use these for marketing measures for similar goods and services for advertising purposes. The dealers often generate considerable follow-up business from this. The dealer also includes this in the cost-benefit analysis of the zero percent financing.

For customers, zero percent financing has only advantages. Apart from a flood of advertising flyers in the mailbox, this loan offers little flexibility. The customer is usually tied to fixed installments, special repayment rights, installment breaks or early full repayment are not granted. Depending on the loan amount and the product, customers with a normal interest installment loan sometimes get away better. For example, if a customer finances his new car with a cheap car loan from the bank and pays the full price at the dealer in cash, he can negotiate a decent discount as a cash payer, which can even exceed the cost of the loan.

In addition, customers with zero-interest loans should make sure that the financing is not tied to conditions that are detrimental to the borrower, such as a required conclusion of a residual debt insurance.

With zero percent financing, the loan amount should be fully repaid by the end of the fixed interest period. If this is not provided for in the repayment plan, the customer should clarify how things will proceed after the fixed interest rate. Follow-up financing is often no longer offered at zero interest. That puts the term “zero percent financing” into perspective.

If the full loan is actually granted for 0% interest, the borrower may not - as is otherwise the case with installment loans - revoke the loan within 14 days. Because the statutory right of withdrawal does not apply to zero percent financing, unless the contract partner explicitly grants a right of withdrawal.

Advertising often gives the impression that everyone who takes advantage of the current offer gets zero percent financing. However, this is not the case. Even with zero-interest loans, customers are checked for their creditworthiness. Only those who, according to their credit check, are able to meet their payment obligations have the chance to receive a "free loan".

Retailer-independent installment loans can be more beneficial to customers in many ways. Anyone who compares well and, if necessary, obtains several offers from different providers can also obtain a low-interest loan from branch or online direct banks. Especially in a phase of low interest rates, consumer loans are offered from around 2% interest - provided that the creditworthiness is appropriate. The big advantage compared to the zero percent loan is the individual contract design and flexibility. Installment breaks, special repayments or a free early full repayment are now possible with many lenders. Borrowers can choose the term and monthly rate according to their individual requirements. If you already have one or more loans running and have additional new needs, the best option is a cheap rescheduling loan. This means that all loan installments can be combined into one installment and the total monthly burden can be reduced by up to 50%. None of these advantages can be found in retailer's zero percent financing.


Even if it sounds very tempting to buy products for 0% interest on installments, consumers should not act rashly, but first check whether other alternatives such as a cheap installment loan or debt rescheduling might lead to a better result.

My name is Quang Lam and I work at Hegner Möller GmbH as Marketing Director. I am very interested in finance and sports. In my free time I like to go running and I also run a running blog. For the Best Credit blog I only write about topics that really interest me.


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