Why Zero Down is a Big Fat Zero for You

We've all read them. Those "zero down" promotions for furniture and consumer goods. It sounds like a good deal up front, doesn't it? Here's why you should not fall for this train wreck in the making.

Keep in mind, that there's no such thing as a "free lunch". There really isn't. You are always giving up something for something else, whether it's money, your credit and even your dignity in some cases. Most times, it is not even a "one for one" exchange either.

Here is how they hose you, to use a term from my youth. Yes, I'm old but not quite that old. Let's take as an example a trip to your local big box furniture store. You walk in there and that pushy salesman talks you into buying that fancy dining room set, which you have just determined somehow that you actually need....er, want.

Because you walked in there without cash, you have already made your first mistake. You have lost all power to negotiate, and you are at the whim of the salesman to set the price. Do you know that people who are rich ALWAYS negotiate for what they want? Why can they do this? Because they can pay the cash and are almost always ready to walk away from the transaction if they don't get the deal they want. In our Credit World society, the art of negotiating has gone the way of the Dodo Bird for the average middle class consumer. Don't for an instance think that bartering and negotiating is somehow a "dirty" or lower class way of doing things! Any person with money will tell you it's the way of the upper class, and it's done every day. Start thinking...preferably today.... of negotiating as something positive and not negative.

Another reason why this "no payments for 12 months" will hurt you, because yes, it will hurt you where it counts....is with your credit score. You and me and everybody knows that to do anything around here and to do it well, you need a good credit score. All of us have been affected by our credit score, whether it was buying a house, renting, buying a car, even getting a job! Do you know some employers will check your credit score and if it's below a certain level, they can deny you that job! Now that's some power!

These financing companies who finance these loans are given a lesser weighted value on your credit score. Less value than let's say your mortgage loan company. Yes, they are looked down upon. Your credit WILL go down if you use a financing company that writes these types of loans. Don't let something like a piece of furniture bring you down like that, and then possibly affect any financial decisions you make after that.

Let's say you don't care and it don't matter what I just said. Okay, let's go onto the next thing. How about you sign the papers, it's a done deal and you get that furniture delivered. You're enjoying it, showing it off to your friends and family...maybe have a dinner or two on the new table. You find that it even makes a good place to hold all your clutter. Then, all of a sudden, your world changes for the worst because you or your spouse lost your job, got ill or had some other kind of crisis that hits you in the money pockets, not to mention emotionally and everything else as well. Now all of a sudden, you have no money to pay that bill. If you have a crisis and cannot pay, the finance company is not a forgiving entity and will hound you like there is no tomorrow (and kill your credit in the process). So, not only do you have to deal with your crisis but also this ball and chain that is now around your neck instead of just your foot.

You say, nawwwww...that can't happen to me! I have a good job, and I never get sick. Well, thank your lucky stars if that has never happened to you and you never have to go through something like that! But, have you ever considered why the furniture stores are even offering deals like this? How can they give something away for free for 12 months like that? They know that the MAJORITY of people who go for these zero down financing deals do not pay the money back OR they pay late or only the minimum and get hit with HUGE finance and late charges. Finance and late charges are the "bread and butter" of any company that gives out credit. It's as simple as that. The same principle applies to your credit card company. These second tier financing companies that give out these loans...cause that's essentially what they are, charge you interest from the time you purchased the item, not when the money is due. Plus, their interest rates are typically much higher than your average credit card.

With all that being said, we all like nice furniture and like to be surrounded by "pretty things". It's okay to like "pretty things". Just be sure when you buy these "pretty things" you keep these tips in mind. Look to buy appreciating items and not items that will lose value. That's what the rich do. Yes, they will buy an antique table before they buy something from a furniture store that's shoddily put together. If no antique, they will at least buy something that is well constructed. Do a search on the internet on how to recognize well made furniture...there are ways to immediately see the difference and use those tools when buying!

Do you have any tips you can share on buying consumer goods? Would you like to share a story of a negotiation that saved you money?

View this article and many like it in this week's edition of Carnival of Personal Finance.
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