FOX 8 Defenders: Consumer tips for interest-free financing

LaPlace, La.-- You've probably seen these types of ads that stress "no interest until November 2017" or "zero financing for 60 months."  They're enticing if you can't afford to foot a bill outright, especially for a big purchase like an engagement ring.

"They are allowing you to have ownership of their product that you are paying for on time, and they're not charging you any interest.  I mean this is a bank loan basically with no interest charge," said Susan Tramontana, Executive Director for the FOX 8 Defenders.  She said the financing guidelines can be strict, and if you don't follow them, you could end up paying more than your initial purchase price.

Newlyweds Amanda and Logan of LaPlace learned the hard way.  They purchased an engagement ring for about $8,000, made a $1,200 down payment and thought they got a deal at a local jeweler for 18 months free-financing.  "After a little more than a year of paying, all of a sudden they looked at the bill, and they noticed now they owed over $2,000 more than what the original purchase price had been," explained Tramontana.

The whole time, they say they made monthly payments, yet instead of shrinking, their outstanding balance on some statements, grew.  "Their problem was in that they never really opened any of the bills, and the bills are quite clear as to what the financed amount was, and what the monthly minimum payment would be, and it even states.. if you only pay the minimum, how much more.. and it amounts to almost $3,000 more in finance charges you pay if you didn't follow the terms of the contract."

They say their down payment was never recorded as one, and therefore the no-interest plan never kicked in.  "If you are looking for a company to give you free money, you have to make sure you've got your obligations in black and white," said Tramontana.

Here's a classic example of another interest-free finance plan: 
The monthly summary account for money owed to a mattress company shows $800.  That month, the consumer paid $100 toward it.  The bill showed zero fees and zero interest charged, and the new balance on the bill dropped, down to $700.  Keep in mind, had the consumer missed a payment, accrued interest charges, which at that point were around $350, would have kicked in on their bill.

Amanda and Logan called volunteers with the National Council of Jewish Women who staff the FOX 8 Defenders for help with their growing engagement ring bill.  While they should have paid closer attention to their monthly bills, the jeweler wiped away all the extra finance charges that had been accruing on their account.

The bottom line is, you shouldn't walk out the door unless you have a contract in hand laying out all the details of an interest-free financing plan.  Pay on time and never miss a payment because if you do, you could be looking at late fees and interest on top of late fees.