The Difficulties of Buying now and Paying later
You should exercise caution when purchasing items with credit from stores that offer financing. You can purchase now and then pay later with these financing offers
Littlewoods is one example of a business that allows customers to pay later and buy items now.
These are a quick way to get access to any item, even if it isn’t your money.
There is always a catch, even though it seems too good to be true. The loan will be charged interest after the interest-free period ends.
How they work
Littlewoods isn’t the only company to do business in this way. Very, Isme and Currys are just a few of the other companies that do business in this manner.
These businesses won’t charge extra if you use them correctly. This will allow you to buy a new washer machine later.
Cara Newton, Shop Direct Group spokesperson, stated that this type of purchasing is not new and allows customers to delay payments while still being able to pay later.
She explains that consumers should be informed about when the interest-free period ends and what interest they will have to pay if the entire amount is not repaid within this time frame.
Many people are not able to pay immediately for something. They may be unable to pay it for six months or one year.
The interest rate charged will vary depending on the store.
You can’t pay your bill within the 0% interest period. Very claims will require you to pay PS5 per monthly or 7% of the amount due. There are severe penalties for missing a payment.
A new iPad from Littlewoods will cost you PS499. This is to give you an idea how much more you’d have to spend. This can be paid over 52 weeks without interest or 104 at 34.9 percent. That’s around PS200 more than what you would have initially paid.
There are many fees that you should be aware of if your payment is late. There is a PS12 late payment fee, and an additional PS12 if the debt needs to be cleared. For any type of debt collection, such as phone calls or letters, there is a PS12 late payment fee, a PS32 price to visit a debt collection home, and a PS25 fee to ‘debtor trace.
Newton emphasizes however that these funds are only available to those consumers the company believes will be able make the repayments. This type of finance is very different to payday loan companies.
Many allow you to purchase something, then you can pay it off in full after a certain period. However, this usually requires a one-time payment.
Currys offers an in-store buy now, pay later option. You can pay the entire balance off, but you will have to pay a PS25 settlement penalty.
The chart below, for example, shows the top stores that allow you to buy now and pay it later. It also lists the interest rates applicable once the 0% period ends.
These stores are important
It is important to replace valuable items in your home, such as the vacuum cleaner, oven, and dishwasher. If you don’t have enough cash to purchase a new item right away, credit cards are an attractive option.
Although the idea of not having to buy something for a year or two is appealing, it doesn’t work if it’s paid off on time. Even then, it could be too expensive.
Second hand purchases
Another option is to search for second-hand websites. It won’t necessarily be new, but it is easy to find products of acceptable quality. Products are often resold on Gumtree or eBay after being used only once or twice.
If you’re picking up electrical equipment from someone else, ensure you have all the paperwork and that you test it before you take it away.
Many websites let you set up alerts to be notified whenever a particular item becomes available.
A credit card with a zero interest rate is available.
Many credit cards offer long interest-free periods. Some allow you to transfer your balance for up to two years. Others provide 16 months of 0% purchase.
These loans have the advantage of allowing you to purchase products with some flexibility. The interest rates after the initial period of 0% average at 16.9 percent. Although this is a far cheaper option than the organisations mentioned above, you will still have to pay the loan off if it isn’t paid off within the 0% period.
A credit card can be used to add extra protection if the item is more expensive than PS100. For more information, see How Section 75 can protect you.
Receive some cash assistance
You should inform a company if you owe money to them and have trouble paying back the loan. You may be able, in the best case scenario, to make one or more payments on time without penalty.
A charity like Step Change might be able provide free support, rather than taking out a payday loans, which will only increase your debt. You can use it to help you create a debt management plan, or negotiate an interest-free period with a lender. It will also provide you with personalised advice. Find out how you can get free counselling.