You’ve read the headline and you are thinking – “This sounds too good to be true”, right? Who on earth is going to want to lend you money and not require you to pay any interest on the money borrowed?
Well perhaps the title is a little disingenuous, as it is true that there are no interest-free personal loans available, but there are other alternative ways you can genuinely borrow money without paying any interest whatsoever. Some of these methods will require adhering to specific rules or being in a specific circumstance, so not every method will be suitable for every person.
With the caveats out of the way and without further ado, let’s jump right in…
Credit card with 0% interest on purchases.
There are credit cards out there that offer 0% interest on purchases for a specified period of time. This time can range from just a few months, right up to more than two years (at the time of writing) – although the longest 0% cards are reserved for people with good credit scores.
There are a few things you need to be careful about with 0% interest cards. You need to ensure that you make at least the minimum payment each month. If you ever miss a payment or pay late then you are likely to lose the privilege of the zero percent interest and your card balance will suddenly be subject to the standard interest rate – which is often relatively high.
You also need to be sure that you have cleared your balance by the time your interest-free deal ends or, again, the balance will be subject to the standard interest rate.
But if you’re confident you can manage the repayments this could be a really good way for you to make a large purchase, spread the payments out over a number of months, and pay no interest at all. Note that the length of the 0% deal and the credit limit you may be offered will vary depending on your credit score.
0% balance transfer credit card
If you have an existing balance on a credit card that you are paying interest on, then flipping that debt over to a 0% interest balance transfer card could save you a packet. You should note that transferring a balance over to one of these cards will usually incur a fee (often a percentage of the balance that is being transferred) – so it isn’t really in the same sense that a 0% interest on purchases card is, but it should still be significantly cheaper for you.
Many bank accounts offer an interest-free overdraft as part of a set of incentives offered to try and tempt customers to switch their allegiance. The length of this interest-free period is often quite short – usually between a few months and a year – after which time it will likely revert to the standard overdraft interest rate which can be quite high (whilst writing this article, I saw one account with Nationwide that reverts to nearly 40% EAR after 12 months interest-free).
Also, these interest-free overdrafts may be associated with accounts that charge a monthly or annual fee – so be prepared for that.
But if you just need interest free cash for a short period of time, this may be a very viable option.
A bit of a different option here. Most people are probably familiar with Paypal as being the preferred payment method and arbiter for eBay purchases. But these days Paypal is more than just eBay’s payment gateway.
One of their products is Paypay Credit and the deal is quite simple. Just spend more than £99 in one transaction and you will get 4 months to pay that money back interest-free. You can make as many +£99 purchases as you like (up to your approved credit limit) and you will receive the 4 months interest-free on each of them.
What’s the catch? Well if you fail to pay the money back within the four months then you are charged interest on the remaining balance – and that interest rate is pretty high (I suspect you are spotting a pattern by now with these zero-interest deals).
But if you are confident you can repay that purchase within the 4 months then this may be a good alternative to a credit card for you. As with any credit, you will need to be credit checked and you could be refused the offer should your credit score not be sufficiently high.
So there we have it. Of course, not everyone will qualify for all of these methods and some may not qualify at all – it really depends on the strength of your credit history. If none of these options are right for you then you may want to look into borrowing via a personal loan or a longer-term low rate credit card. And as ever, should you be struggling with your debts then you should seek free advice from one of UK based debt charities such as Step Change or National Debtline.