The Real Cost of Interest-Free Deals

Interest-free financing offers.

Many retailers offer interest-free finance deals, but it’s crucial to understand the terms and conditions of the deal before you sign up. Make sure you read all the fine print and ask questions about any other fees involved. Interest-free deals often come with additional fees.

Read on to find out everything you need to know about interest-free deals, including answers to FAQs.

What fees can you be charged on an interest-free finance deal?

This depends on the terms and conditions of your interest-free finance deal. Different lenders will have different terms and conditions. Lenders typically charge some or all of the following fees:

  • late payment fees (or interest penalties)
  • application fees
  • service fees
  • annual fees
  • very high interest rates if you don’t pay off the amount you borrow in full during the interest-free period.

However, it’s important to remember that you can avoid some of these fees. If you make your repayments on time, then you won’t be charged late payment fees or interest penalties. What should you watch out for with interest-free finance deals?

Besides any fees outlined above, check that the minimum repayments you need to make will fully repay the amount you owe. If they won’t, you’ll likely have to pay a high interest rate on any amount you still owe at the end of the interest-free finance term.

How long are interest-free finance terms?

This depends on the lender, but they typically range from six months to five years. The shorter your term, the higher your repayments will be if you borrow the same amount (and vice versa).

Is there a cooling-off period after you sign an interest-free finance deal?

Yes, there is a cooling-off period of five days where you can cancel an interest-free finance deal under New Zealand law. However, if you’ve already received the product (or products) that you received on finance, then you will need to pay for them some other way (or return them if the retailer has a refund policy).

If you haven’t received your order, you can simply cancel both it and your interest-free finance contract.

Are interest-free deals cheaper than using your interest-free credit card?

Again, it depends.

If you have an interest-free period on your credit card and you repay the balance in full during that interest-free period, then the cost of using your card may be cheaper (depending on the fees on your interest-free finance deal).

However, it’s important to understand that your credit cards may have a higher interest rate than the interest-free finance deal. If you use your credit card and don’t pay off the full amount before your interest-free period ends, you may end up paying more if its interest rate is higher.

The interest-free period on a credit card will also usually be a shorter term (usually 6 months) than you can get with other types of interest-free finance deals.

That makes a credit card a less attractive option unless you’re sure you can afford to fully pay for the item you buy during the interest-free period.

Which retailers use interest-free finance deals in New Zealand?

Many of the big furniture and appliance retailers in New Zealand offer interest-free financial deals, including:

  • Harvey Norman
  • JB Hi-Fi
  • Farmers
  • Big Save Furniture
  • Noel Leeming.


Are interest-free finance deals a good idea?

This depends on your individual financial situation and needs. If you can afford to pay off the goods you buy in full during the interest-free term, then interest-free finance deals can allow you to get what you need now and avoid paying interest. It also depends on whether the goods you want to buy are priced well now compared to what they may be in the future. If you can get them cheaper now, then an interest-free finance deal may be a good option.

The bottom line

Don’t be pressured into rushing in and signing an interest-free finance deal. Make sure you fully understand all the terms and conditions first to ensure they suit your needs and financial situation. Lenders and retailers in New Zealand are legally required to disclose this information to you before you sign any finance deal. In some cases, a credit card could be a better option for you.

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