Zero percent or 0% loans are loans for which you need to repay only the principal amount. You are not required to pay the associated charges and interest. Considering these seemingly reasonable terms, it is understandable that people gravitate to these loans. However, you ought to keep in mind that these loans do not come with a 'no strings attached' deal.
Lenders typically offer these loans to applicants who have an excellent credit report and credit score. As a rule of thumb, you should have a credit score of 720 and above.
If you are approved for your 0% loan application, ensure you follow all the stipulated, instructions, terms and conditions. If these criteria are not met, you can expect a hefty penalty to be levied.
Also, making late payments, missing deadlines, and not paying the whole loan amount can all reflect poorly on your credit record and damage your chances of getting approved for future loans. You need to make sure you check the eligibility criteria and the hidden charges that come with it before applying for a 0% loan.
Do you qualify for a 0% Loan?
This brings us to whether you are eligible for a 0% loan. The eligibility criteria for these loans are the following:
- You must be above the age of 25
- You need to be a resident of the UK
- You need to have a credit score that is ideally well above 720
- You need to make sure you have a steady source of income.
- You will also have to present additional documentation if you are self-employed.
- Make sure your net income meets the lender's stipulated requirement. The lender generally asks for the latest salary slip. It must be at least equal to the minimum salary required for the 0% loan approval.
- You must not have any cheque return history within the past six months
When can you apply for a 0% loan?
If you've submitted all the necessary documents, it should take 0% loans 48 hours to get approved.
A relatively larger loan amount that companies and businesses typically avail will take longer to be approved. This is due to the detailed documentation analysis, which means loan processing will take a lot more time.
However, if you do not submit the necessary documents, lenders can choose not to approve your 0% loan. You will have to find out which documents are required to ensure the loan approval happens. As you apply for the 0% loan, you may want to ask yourself the following questions:
Is it necessary to borrow?
Ask yourself if you really need to borrow a loan. Try to minimize the amount you borrow if possible.
Is this loan for a planned purchase?
If you have a planned purchase in the pipeline, borrow a loan if you have no other choice.
Can you afford it?
Borrow a loan only if you can repay the amount. Otherwise, borrowing a loan is pointless. Failing to make repayments on time will damage your credit score substantially.
Are your loans at high-interest rates?
If you find that you are subject to high-interest rates, chances are your lender sees you as a financial risk. This happens when you have a poor credit history. If this is the case, be sure to look up loans for bad credit. Also, you need to improve your credit score by making timely payments.
What charges come with 0% loans?
0% loans may seem ideal. However, they often come with a slew of associated charges. For instance, if you skip a payment the credit reverts to a standard loan, in which case the interest associated with 0% loan, initially waived off, will now be added.
Aside from this, you have a transaction fee that you will have to pay when you transfer money from a regular credit card to a zero-interest credit card.
In the UK, this is a major issue for customers who transfer small amounts from one account to another frequently.
Where can you avail 0% loans?
0% loans are surprisingly accessible. These are a variety of sources of 0% loans that can look up. Here are a few:
Electronics and Furniture retailers
If you want to buy a new TV or a sofa, you can expect retailers to offer you excellent deals on 0% loans. This works perfectly for both the retailers and customers. If you make your payments on time, you should have no issues.
Medical Providers
Certain medical providers also support the scheme, due to which some banks will offer you 0% loans on medical care.
Car Dealers
Here's another source of 0% loans. You can expect car dealers to offer you a 0% loan when you purchase a new car if you have an above-average credit score. You can typically avail these loans during the promotional period.
You should note that the entire loan is not interest-free. You may not have to pay interest during a certain period.
Conclusion
There you have it - what you need to know about 0% loans to get started. While they are seemingly ideal, 0% loans may not be the best choice for you unless you are prepared to take care of the hidden and associated charges, some of which are mentioned above. As a rule of thumb, you will want to make timely repayments and improve your credit score.
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