Consumers are being warned against ‘buy now, pay later’ shopping promotions, which can cost them thousands of dollars in interest.

“Of course, no-one in their right mind would do this but it does illustrate the perils of paying only the minimum monthly amount on any loan, let alone one charging nearly 30 per cent interest,” - Peter Arnold

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Buyers Beware

Consumers are being warned against ‘buy now, pay later’ shopping promotions, which can cost them thousands of dollars in interest.

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Buyers Beware

News: 8 July 2008
Consumers are being warned against ‘buy now, pay later’ shopping promotions, which can cost them thousands of dollars in interest. Financial research and ratings agency Cannex claims that stores such as Harvey Norman, which offer ‘interest free’ periods or deals that allow people to ‘pay nothing for 24 months’, can be a debt trap.

“Interest-free offers or store finance are great if you play by the rules and repay in full before the promotional date expires,” says Cannex financial analyst Peter Arnold. “However, events that come out of the blue can derail the repayment process, potentially stinging the customer with up to 30 per cent interest on the amount still owing.”

Cannex calculated that a shopper who bought $10,000 worth of goods on an 18-month interest-free deal, and then failed to pay off any of the amount owing during that period would be hit with a bill of $12,361.

They would pay $745 more than what they would have owed had they instead taken out a three-year personal loan, charging 10  per cent interest.

Someone who did not pay off the amount owed for 31 years would be slapped with a whopping $41,608 bill.

“Of course, no-one in their right mind would do this but it does illustrate the perils of paying only the minimum monthly amount on any loan, let alone one charging nearly 30 per cent interest,” said Arnold.

Cannex issued the warning as it published its latest ‘personal loan star ratings’ report. The paper gives star ratings on personal and car loans, depending on the fees, interest and flexibility on offer.

The report showed that many of the country’s bigger banks are not offering the same level of value as smaller counterparts.

Bankwest, Westpac and the Bank of Queensland, for instance, received low ratings for some loans compared to lesser known lenders.

For a full copy of the star ratings report, visit www.cannex.com.au 

By Joanne McCulloch
8th July 2008

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