Skip to content
Download Consolidated Credit's Free Debt Relief Guide

Beware of deferred payments and zero per cent interest financing.


You’ve heard the saying, “if it seems too good to be true, it probably is”? This is definitely the case when it comes to deferred payments and zero percent financing. The lure of “buy-now-pay-later” and cheap money is to compel you to make a purchase. But be warned, the appeal of these financing arrangements are often not as attractive as they seem on the surface. In many cases, they end up costing you more.

Deferred payments

“Don’t pay for 18 months,” and “Zero money down“, don’t pay for a year, all sound great. You can enjoy your purchase now and then save up the money to pay it off without penalty, right? It’s better than slapping it down on your credit card and accumulating interest at the very least, right?

“As an absolute rule, the best way to make a purchase is to save up the cash and pay for it outright. When you take out a commitment of debt, whether it is on a deferred payment basis or on your credit card, there is a good chance that it is going to cost you more than if you paid in cash. Sometimes it’s a lot more, “says Jeff Schwartz, executive director, Consolidated Credit Canada.

“If you do make use of deferred payments, make sure that you read the fine print in detail so that you can plan your repayment to avoid hefty interest charges,” says Schwartz.

Understand the real costs of deferring interest

Go with the mindset that the companies that offer deferred payments and cheap financing will make money off of your debt. Let’s discuss how the financing company will do so.

In many cases, you will accumulate multiple fees. It may be an administrative fee or something along these lines. The fees are an accumulation to absorb the cost of simply taking out the loan and deferring payments.

It is essential that you understand exactly when the promotional period ends. Specifically, when your first payment is due. Terms such as “don’t pay for three months”, “don’t pay for a year” etcetera can be confusing. In most cases, if you don’t pay off the balance in full, you will be on the hook for substantial interest charges. The interest rates on one of these “deferred payments” and “zero percent interest financing” credit extensions are far higher than a regular credit card. Paying interest that has accrued over the promotional period can result in outstanding debt.

Also, understand that sometimes there is a delay between payments being applied to your account. If you wait until the last minute, you may still be obligated to pay all of that interest.

Why zero per cent financing might cost you more

For car loans, in particular, car dealers try to get you to buy by offering zero percent financing. It sounds like a great deal. But it often is not.

Again, financing companies will not give credit away for free. When they discount financing, they need to take the money from somewhere else. When it comes to cars, they may be adding in extra fees, not giving you as substantial a discount on the car itself, or not offering as many features as they might be otherwise.

You will usually get more bang for your buck if you can put down a sizeable down payment or if you can pay for it entirely in cash. Cash and carry will always get you the best price on the spot and ultimately cost you the least in the long run.

Has the buy-now-pay-later mentality caused you to accumulate a lot of debt? If you adopt a cash-only approach, you’ll work towards getting out of debt. We can help you get started. Call us at (855) 912-5938 or click on our online debt analysis.

What is your total credit card debt amount?

Provide a few details about yourself.

##first_name##, here are your next steps...

Get a clear picture of your spending vs. your income. Begin your online budget and financial analysis now by clicking the button above.

Our experts are here to help you understand your options and reach your goals. After you complete the easy-to-use online budget, one of our trained counsellors will reach out to you and provide recommendations.

Everything shared is 100% confidential and secure.

I understand and agree that by choosing “Start your online budget now”, I am voluntarily providing certain personal financial information in order to educate myself as to my current financial position. I understand that this budget tool is educational in nature, and that none of the information received in the form of a budget constitutes financial advice, nor does it constitute a counselling session. I understand and agree that the budget depends on the information I input into the fields, and that Company does not represent or guarantee the accuracy of the budget. I understand that this tool may collect information and should I choose not to provide such information, I am not to proceed further. If I choose to abandon the tool midway through the process, I understand that the information will not be maintained and I would be required to start providing the information from the beginning. Company disclaims all warranties associated with the budget tool herein. I understand and agree that Company may use the contact information provided herein to contact me through various means of communications, including automated messages, and that I expressly consent to receive these messages.

Consolidated Credit Counseling Services of Canada Inc BBB accredited business profile