Money For Nothing – The Chicks Aint Free

Post by Sharat on April 12, 2010 · Under Business News, Featured Articles, Hints and Tips, Personal Finance, banking, credit cards, interest rates, loans, personal loans · Comment

If you were to approach the manager of your local branch and ask him or her how to get free credit, the chances are not very high that they will fork over the information so easily.

Of course it is completely possible to borrow money interest free, and we will explain three methods of doing so.

In life when someone offers you something for free, that is usually the signal to start paying attention and find where the catch is. So whilst we seek to let you know how to borrow money for nothing, you should also be aware of the pitfalls associated with each method.

If you do not mind your finances properly, these methods of borrowing can lead you deeper into debt. So do be careful.

If you’ve been hunting through the personal loans section at your bank, you won’t have found these options. In fact, providers don’t label them as ‘loans’ at all!

1.) An interest-free overdraft

A lot of current accounts these days come attaches with 0% interest overdraft facilities attached to the account. The amount one can borrow varies from account type to lender, but can be as much as $5000.

The major drawback with this is that 0% is usually an introductory offer aimed at attracting new customers, and usually not applicable after the first twelve months. After a year lenders will usually charge some kind of usage fee.

Obviously your overdraft limit will be determined by your credit rating, and the length of time you can borrow money is dependent on the account.

Overdrafts are not a long term way of borrowing money, and after the introductory period expires, usually they attract substantial interest rates on the amount you are overdrawn.

What to watch out for: It’s extremely important you never exceed the 0% overdraft limit. If you fail to obey the limit you will be pushed into an ‘unauthorised’ overdraft – on which you’ll be charged horrendous rates of interest (typically 20-30% APR).

2.) A 0% on purchases credit card

The second method of obtaining free credit is to apply for a credit card which has an introductory 0% offer for all new purchases.

Obviously the lender will indicate what your credit limit is, even before you apply for the card, and will depend on your financial circumstances.

The interest free period depends on the credit card, usually the longest period you can borrow interest free on a credit card is a year, so clearly this type of borrowing is also not long term.
When the 0% deal ends, a very high level of interest on your remaining balance will be charged (typically 15-20+% APR) – so it is extremely important that you clear your balance before this happens.

If for whatever reason a balance remains, then you should seek out 0% balance transfer deals, and transfer whatever debt remains to the new card.

Transferring an outstanding balance tro a new card is not as easy as it used to be. In the post financial crisis world, lenders have tightened their standards, and it is not always guaranteed you will be given a deal.

You also need to make the minimum repayment every month. If you make it late or default on a payment, you may well be fined, and your 0% deal is likely to be taken away from you.

3) A 0% on balance transfers credit card

The balance transfer to a 0% card is the most common advice given to people who want to reduce their interest payments or borrow money for nothing.
God we have given it here many many times already.

The basic premise is if you have borrowed money already using a credit card, you can turn the debt into an interest free loan by shifting it to cards which offer 0% interest on balance transfer.
The amount you can shift will largely depend on your card issuer, credit rating and salary, and you will be given a limit before the card is issued.

Some balance transfer deals can last as long as 15 months, but as soon as the introductory offer ends, you will be paying very normal credit card APR’s.

The vast majority of balance transfer credit cards charge transfer fees (typically 2-3% of the total debt) to move your money onto them.

If you don’t manage to clear your debt during the 0% period, you’ll be saddled with big interest charges.

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