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Why 0% financing from retailers can be a bad deal

It's smart to consider your options
It's smart to consider your options | Yuji Sakai/Photodisc/GettyImages

It's smart to consider your options

You may plan to pay off that deferred-interest loan before the promotional period expires, but sometimes life gets in the way.

"What we've seen over the past few years is that people have every intention and ability to pay off the loan," Bowne says. Then "unexpected things occur, and suddenly they can't make that payment every month."

So weigh the odds. Do you have the money to pay off the purchase in cash now? Can you set it aside, just in case? Is the purchase a want or need? Do you have other payment options?

Explore alternatives, like a low-interest credit card or a small personal loan, which may offer interest rates significantly cheaper than what you'd pay if you missed the deadline for eliminating a deferred-interest balance.

"You don't want to use it for hospital bills," says Chi Chi Wu, staff attorney with the National Consumer Law Center. Interest-free medical financing can carry high interest rates when the deferred-interest period expires, and many hospitals offer more reasonable payment plans and other options. And in a few states, alternate payment options are required for eligible patients, she says.

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Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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