I told you last week that I bought a brand new living room furniture set. It cost quite a bit of money (about $2,700) but I have some great furniture, a new TV, and actually a lot of money in my pocket.
Even though I had enough money to pay for the furniture outright, I took advantage of the 0% financing through January 2016 (after putting $500 on my credit card to get some rewards).
Instead of paying $2,700 up front, I put $500 down and took out a loan at 0% for the rest. My furniture will only cost me about $60 a month every month for the next four years.
And I won’t pay a dime of interest over all that time.
Now I Can Pay Off My Student Loans
I’m planning on paying off the last $7,000 of my student loans in a few weeks. I’ve been hoarding cash for months to do this. However, if I had spent $2,800 up front on my furniture then I wouldn’t have the money to pay off all my loans.
Basically, GE Financing is loaning me money at 0%, which allows me to pay off my student loans at 2.38% (yes, I have a super cheap variable interest rate on my student loans).
That’s free money.
If you can get a loan at 0% and you’re certain you can adhere to the rules to keep the 0% rate (usually making all your payments on time and paying off the balance in full by a certain date), then it’s almost always best to take the loan.
Let’s pretend I didn’t have student loans to pay off.
I could have put the money in my Lending Club account, which is currently giving me a 13% return.
I could have put the money in the stock market, where who knows how much money I might have made or lost?
Heck, I could have put it in a savings account and gotten 0.50% interest, which is still a net gain considering the loan is at 0% interest.
As long as you aren’t worried about your credit score dropping a few points, and you are certain you have the money to make payments, then I always recommend getting the 0% financing.
Readers: If you were buying a $2,700 living room set and had enough money to pay it in full, would you pay it upfront or take the 0% loan?