What is the hook with a free loan? | Payday Loans
My view is that it is not really as common anymore with free loans in the micro-loan industry. But they are still there and the natural thing is to think that there is something smart about it all. But in fact, it is not even if one should watch out.
The first thing we should clarify is that a loan that a lender says has 0%
In effective interest is a completely free loan. You will then only have to repay the capital debt itself and nothing else. Thus, it is not a way for rogue lenders to withdraw money on you. Should a lender demand that you pay a lot of money even if you have taken a free loan from them, they will violate the law.
This is where you should look out for a free loan can lead to costs in the future, this is what the lender hopes for. Firstly, they get you in as a customer, which makes you more likely to borrow money from them again and then of course it will cost money. A free loan is only available to new customers.
The next question is why do they lend money for free?
They can also make money from you and the loan that should not cost any money, but this is only if you do not take care of it. Should you not repay the capital debt as you should, the risk is very high that there will be costs for you. Which is fully allowed for the lenders to charge if you do not fulfill your commitment.
So there is no hold hook, but you still have to be careful as it can cost a lot of money if you do not have the discipline to pay back. It is important then that if you decide in the future to borrow again, you should never automatically choose the lender who lent you money for free. Compare rates with several lenders the next time you borrow as there may be cheaper alternatives.