In its simplest form, borrowing means that one person has extra money that he or she is willing to give temporarily to person Two, who on turn is in dire need of extra money at that very moment. Good Finance promises to repay the money he borrowed. He also pays person compensation for the time he has not yet recovered his money.
This compensation is called interest. Interest is a loan guy, they are always together. But is it possible to get a payday loan without interest?
Credit Card Loan Can Be Free
If you have an annual credit card, you can take advantage of a “free” loan, which is no interest or other costs. In this case, you will have to pay off the full amount as soon as the first invoice is issued, which will result in no interest or even billing costs.
A payday loan without interest is possible, but…
In reality, it is a little more complicated. While a payday loan without interest is possible, there are a few important things to keep in mind, and at least keep in mind the old adage that there is no free lunch. There may be other costs in addition to interest.
You have to pay off the loan in one way or another because it is a debt.
Interest versus other expenses
Often, there are always some costs involved in loans. If there is no interest on the loan, other costs are usually added to it. Payments of interest are often made, for example, in the form of a billing surcharge or withdrawal fee.
For example, there are instant no-interest tips if you pay off the loan with all its costs on the first due date. The interest rate on these loans is 0% up to the first due date. Instead of paying interest, these loans often have to pay a 10% withdrawal fee and an account management fee of EUR 4.90 per month.
First payday loan without expenses
Sometimes it is possible to spot loan deals that offer a loan at no cost. In most cases, this is a loan offer that is specifically aimed at new customers.
In this case, the purpose of the lender is not so much to get the proceeds of the first loan taken by the customer, but to get him hooked on the product. This would allow the customer to become a regular customer who would raise loans time and again, even at higher costs and interest rates.
This marketing trick will also allow for completely no-cost loans (no interest, withdrawal fees or other potential costs) on the first occasion.
The current APR also takes into account other expenses
There may be many disagreements about the effectiveness of a real APR in a loan comparison, but it also reveals costs other than the nominal rate. It also takes into account the cost of processing the loan, the advertising costs incurred in paying the loan and the opening and service fees.
If the actual annual interest rate on the loan is 0%, it is probably a truly no-interest loan.