Interest free' usually refers to loans or other types of credit situations, and while your money is on the tight side you may be tempted to check one of these loans out for yourself.  But interest free offers are not always what they are made up to be, and while they may be handy in a financial bind they could be very dangerous to you if you do not take into account the way your loan agreement is worded.  If you follow the agreement to the letter, these 'buy now pay later' interest free loans can work well for you.  But you need to understand that there are pitfalls with this type of loan, and if you do not pay off the loan within the set amount of time - say six months - you are looking at paying the loan back at a high interest rate that can be up to 30% or more. 

While an interest free loan may look appealing to you, you have to understand exactly how they work.  As we mentioned above, when you take out an 'interest free' loan, you have a set amount of time to pay it back before interest on the loan takes effect.  To avoid paying this high interest, you need to know how long the interest free period lasts, what the interest rate will be when the interest free period is over, and whether or not you can set up a direct debit to pay off the balance of the loan.  Once you know these things, you know how long you have to keep from getting hit by these high interest rates. 

If you think that the high interest rates are nothing to worry about for the remainder of the loan, think again.  The interest on interest free loans is back dated to the day you signed the loan paperwork.  That means you really are not getting any amount of payments interest free if you do not pay off the debt in time.  The loan could cost you considerably more money than you ever planned on borrowing, and in the long run you would've been better off going for a conventional loan.  Additionally, make sure that the loan that is being offered has not been 'marked up' so that you are not paying more than you should be or could be paying somewhere else. 

One thing you need to remember with these loans is that you need to keep very good records of all of your payments in the event that the loan company wants to tell you that you did not pay off the loan in the allotted time frame.  Get copies of your cheques or get receipts if you pay cash.  Keep all of the paperwork in one place so that you know where they are and that they are all there in the event of a dispute.  You need to be able to prove that you made all of your payments on time every month in order to keep from being hurt by high interest rates.