Interest-free loans

If you are reading this article it is because you are interested in knowing information about interest-free loans. The first thing you should know is that interest-free loans do not exist and that, despite the fact that the term credit is used countless as a synonym for the loan, they are not the same and you must differentiate them.

If what interests you are to access a fixed amount of money and return the money in installments, but in this case without interest, read on, because today we explain the reality about interest-free loans.

Difference between credit and loan

Difference between credit and loan

Many people often think that the terms credit and loan mean the same. However, they actually have differences that we will mention below:

  • By granting yourself a loan you have access to all the money to acquire the good you want. However, with a loan you request the amount you need to cover possible liquidity failures .
  • In loans you pay interest for the entire amount borrowed, in credits only for the amount you have used.
  • The repayment term in the loans is long, depending on the amount can be months and even years. In addition, when all the money has been reimbursed, the operation is closed. On the other hand, financial institutions usually renew credits annually.

Are there interest-free loans?

Are there interest-free loans?

Interest-free loans are those where you return the money borrowed without paying additional interest.

It seems like a fantasy, but they do exist. Interest-free loans are a commercial strategy launched by financial institutions to attract customers. In general, this product has certain characteristics such as a small amount, short-term return, TIN and 0% APR rates. In addition, they are usually only aimed at new customers.

For this reason, interest-free loans are perfect for those who need to cover momentary liquidity problems.

Types

Types

Financial institutions offer various types of interest-free loans:

  • Consumer loans: they are used to pay for the purchase of consumer goods, such as a car, a computer or household furniture.
  • Funding for studies: they are focused on covering undergraduate and postgraduate tuition.
  • Mini loans: they are usually granted by private lenders and managed quickly online. Usually, the amount is minimal and the return is usually in 1 month.
  • Payroll advances: After analyzing your financial profile, the bank lends you an amount based on your payroll income.

When is a loan really free?

When is a loan really free?

A loan is really free when you are not charged any TAE or TIN interest rate. In addition, you do not have to pay commissions for account opening, use of the online platform, or urgent management. That is, a loan is free when you only repay the amount of money borrowed.

For this reason, it is important that you use a loan comparator to get the best free loans.

Are there cheaper options than interest-free loans?

Are there cheaper options than interest-free loans?

Interest-free loans are the cheapest options that exist. For this reason, they are also known as free loans, because you will not have to pay any commission, interest, or additional fee.

Requirements to request

Requirements to request

In general, the requirements to apply for loans online are simple and depend on the entity where you make the application process. Next, we mention them:

  • Have residence.
  • Age between 18 and 75 years.
  • Recurring and sufficient income to cover financing.
  • Mobile phone and email account.
  • Have a bank account in your name.
  • Not be enrolled in any delinquent file. If you are, it is convenient that you have no debts with other private lenders.

Documentation to get an interest-free loan

Documentation to get an interest-free loan

Management is almost immediate because entities do not request physical documentation. This means that the management is done completely online, using web platforms that verify your personal and financial information in seconds.

However, some companies may ask you to send some scanned documents, such as: DNI / NIE, payroll or pension receipt and bank movements. On the other hand, if you are a self-employed person, you can request the last VAT declaration.

Can I return a loan without interest on installments?

Can I return a loan without interest on installments?

Yes, interest-free loans can be repaid on time. Usually the term to pay is not more than 30 days, although this will depend on the borrowing company. There are some that extend financing terms more, with periods ranging from 60 to 180 days.

Interest-free loans are not always free

Interest-free loans are not always free

You must be very attentive to these types of loans, because they are not always free. If you are charged commissions for processing and clauses are established for the purchase of related products as insurance, the result is that the financing is not free, and could be considered a misleading offer.

For this reason, you should be aware and read the fine print to avoid free trick loans.

What limitations do they have?

What limitations do they have?

The main limitation of interest-free loans is that the amounts of money are small and the time to repay the money very short. This is because they are financing created to cover momentary financial imbalances.

What happens if I can’t pay my loan?

You would be in default and you would be penalized with the cancellation of default interest. Generally, these interests are calculated on the amount due, starting with a percentage of 1% that will increase according to the days elapsed.

You will also have to pay recovery fees. Now, if in the end for some reason you cannot pay, your name will be included in a delinquent file.

Loans without commission are a good alternative when we need a sum of money at a specific time that we do not have. However, as with any other loan, we recommend that you inform yourself, consult the alternatives and analyze your situation. In addition, it will be relevant that you be clear if you can return it on time so that you are not suddenly in a worse situation than you were facing before applying for the loan.

It is normal to need extra income at certain times, such as when we must assume an unforeseen expense. Our recommendation is to go to an expert advisor, who will not only help you choose the best option at the moment, but through an analysis of your financial situation can help you establish a plan that covers unforeseen expenses and guarantees Your current and future financial well -being. 

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