Interest-free Loans: What Are They? How to Get Them?

Interest-free loans seem a very interesting option when requesting money from a bank. However, do you know what they are? Do you know their characteristics? Do they really offer an interest at 0%? Let’s review in this BillCare guide everything you need to know.

If you need to finance a small vacation, buy that bike that you saw so long ago or change the TV in the living room, most likely you are thinking of applying for a bank loan. In this case, it is most likely that you have already seen the offers and promotions of the different entities offering interest rates at 0%.

However, the first advice is to not believe in everything that banks promise. In fact, with many of the loans that claim to have no interest, you will end up paying rates that were not considered in your calculations.

This is due to the fact that a large part of the interest-free loan promotions refer only to the Nominal Interest Rate (NIR) and omit the information regarding the Annual Equivalent Rate (APR). To give you a clear idea of ​​how this type of loans really work, we present below everything you need to know.

What is an interest-free loan?

What is an interest-free loan?

As you should already imagine and as we have previously announced, a 0% loan or an interest free loan is a banking product where you only have to pay back the money borrowed. In other words, when you take out an interest-free loan, you will not have to pay any costs.

Currently, many banks and financial entities offer their clients this type of product. However, you must be careful, because not all 0% loans work in the same way.

What types of interest-free loans are there?

What types of interest-free loans are there?

When looking for a 0% loan, you will notice that the different banks and banks offer a wide range of products. In effect, there are currently different types of loans without interest and each of them has special characteristics and conditions.

For this reason, before deciding on one or the other, it will be necessary to evaluate each one separately and assess which is the most appropriate to your needs. Let’s review what are the different 0% loans that exist in the market:

Personal loan without interest

Personal loans without interest refer to when a bank lends you a certain amount of money and where it will not generate interest. They are called in this way because 0% is applied to the TIN, however, in most cases, these loans involve commission payments or other associated expenses.

In this sense, it is important that before a type of personal loan at 0% you always look at the APR, comparing all the offers and choosing the cheapest one.

Consumer loans

Consumer loans are very popular in Spain due to their easy acquisition and few requirements at the time of requesting them. Generally, this type of loans are granted by large stores or non-financial companies in order to attract the customer to purchase their products or services. These interest-free loans usually have a purchase limit and your payment can be made in several installments.

0% Minicredit

Mini-loans at 0% refer to loans of low amounts of money where the client will only return the requested capital. In general, banks will lend between 50 and 1000 euros for a product considered as mini-credit. Most of these types of products do not have commissions or other additional costs. Mini- credits and micro-credits are completely different banking products.

What points must be taken into account before hiring an interest-free loan?

What points must be taken into account before hiring an interest-free loan?

 There are different types of loans at 0% interest. As we have said before, banks offer all types of loans without interest, however you should not trust everything you see. Before hiring a product of this type, it is important that you take into consideration certain aspects that you should not forget when choosing a loan without interest.

TAE is not the same as TIN

Many loans that claim to be at 0% are only in consideration of the Nominal Interest Rate (NIT), however, the client must equally pay the costs related to the Annual Equivalent Rate (APR).

In this sense, we advise you to review the fine print of the contracts and verify that it is a real loan without interest of any kind.

No interest but with many commissions

Some banks offer loans without interest, however, they charge quite high fees of all kinds. One of the most used commissions by banks are opening ones. Given this, we advise you once again to read the terms of the contract very well.

Compare is save

One of the safest ways to hire the right loan for your needs without paying more is to compare all the offers presented by the market and read in detail its characteristics and conditions.