INTEREST FREE DOESN’T MEAN COST FREE…

Reception • August 27, 2020

TEMPTED TO BUY THAT NEW LOUNGE, HOME THEATRE SYSTEM OR TELEVISION BUT DON’T HAVE ENOUGH MONEY TO PAY FOR IT RIGHT NOW?

Before you sign on the dotted line for in-store interest free finance, think carefully and read the fine print. More importantly, do your research! Well… we have done this for you!



Many retail stores offer interest free payment terms, especially during the end of financial year sales. But beware! These ‘interest free’ deals that allow you to take your goods home and pay them off over time aren’t always cost free!

Choices, choices, choices

Not only can you get ‘interest free’ store purchases, there are ‘interest free’ credit cards and ‘interest free’ loans – well ‘interest free’ within a certain timeframe that is.


They all have their own features, benefits and pitfalls.


Usually with in-store interest free deals, you are provided with a store card or credit card with a credit limit to cover the cost of your new purchases. These deals typically have a higher limit than the goods you are purchasing.


It is not uncommon for stores to offer various interest free deals as they really want your business. Their range of options attracts different clientele. We have seen the mega chain store giant, Harvey Norman, offering seven different interest free options at one time!


And of course there are the buy-now-pay-later options with Afterpay, Zip Pay and the like (that’s a whole other topic) that have very similar features.


However these options also require thorough consideration before taking action.

Did you say 29% interest rate?!

Retailers have different offerings and their payment terms will vary, so it is important you read all the conditions for each loan option as they will differ.


For example, the interest rate you will be charged if you haven’t repaid the balance by the end of the interest free period can be as high as 29%. That is even higher than most credit cards!


Make sure you calculate your regular payments to ensure the balance is paid off before the end of the interest free period. It is wise to set up automatic direct debits so you don’t miss any payments.



This case study by ASIC’s MoneySmart shows you why.

Case study: Ron and Maya compare interest free deals

A young couple, (Ron and Maya) discussing interest free deals, both got interest free deals but for different amounts.


The interest free deal worked out well for Ron as he increased his repayments to pay off the deal in time.



But Maya just left her repayments at the minimum amount and ended up being charged 29% interest and still owed a lot at the end of the interest free period.

Details Ron's deal Maya's deal
Purchase $2,000 couch $1,500 fridge
Interest Free Period 12 months 12 months
Repayments $200 monthly Minimum Repayment
After 12 months Fully paid off Paying 29% interest on a $1,000 balance
Outcome Happy with the deal Stressed with more debt

Source: ASIC MoneySmart, Interest free deals

If your interest free deal comes with a credit card – BEWARE! Additional purchases won’t necessarily be on the interest free terms and you could end up paying high interest rates on those additional products immediately. Plus, there is always the temptation to buy ‘something else’ with the remaining credit available. Nothing to pay! No deposit! No interest?


Sounds too good to be true? Well it usually is. These catchy headlines may draw you in-store or online but there are fees associated with your shopping that may include application, processing or account keeping fees.


Interest free finance arrangements can be a great way to reward yourself with some of the finer things in life – or even practical purchases like appliances when you are home making. But these arrangements are only beneficial for those who are regular on-time payers. Otherwise you may find yourself just like Maya and stressed with more debt – and of course we don’t want that!


Remember: every credit application, loan, credit card AND interest free deal you have will go on your credit report and can affect your future borrowing power. Many Australians take out interest free finance without realising it is actually a loan and the penalties in the end can be high.


We leave you with two key thoughts on interest free shopping:


  1. You have to be able to afford the repayments and ideally pay the item off before the interest free period expires. You don’t want to put extra pressure on your cash flow.
  2. If you only pay the minimum monthly repayment you won’t have your purchase paid off by the end of the interest free term and you will be slugged with high interest and more fees.


If you are one of the 1.6 million Australians who already have 3 or more credit cards1, perhaps another interest free deal isn’t for you! Saving or the good old fashioned lay-by may be the answer.


Before you are tempted into interest free shopping, please call us, even for those new small debts. We can help you make the right decision to reward yourself now and in the future.

Source and links:

1. Finder, 1.6 million Australian’s have 3+ credit cards

Disclaimer: This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. ©2019

6 Tips to Help Choose Between Selling or Renovating

By Kola Dev • September 2, 2024
Assessing the benefits of an extensive home renovation against selling your property is always a worthwhile exercise. Selling your home is rarely an easy decision. It will often hold family memories, and that makes it tough to leave. It’s also likely to be your most significant financial asset, and you want to be confident you can maximise its value. The process of selling isn’t cheap with commissions, legal fees and taxes. But the alternatives are to tolerate your home in its current condition or to talk to an architect or builder about giving your home a makeover. That’s not cheap, either. Costs can run into hundreds of thousands of dollars, and there’s never a guarantee the work will finish on time and budget. If you think selling is stressful, you should try a large-scale renovation! Regardless of which way you jump, it’s likely you’re going to need finance - whether that’s refinancing your current loan for a renovation or a new loan for a new property - so it’s worth talking to your mortgage broker to understand your options. Here are a few tips to help you think it through. 1. Structural issues Nothing dates a bathroom like colour. You can tell if it was built in the 70s and 80s merely by the colour scheme. Most bathrooms today are based on white, rather than old school creams or browns. If your bathroom can remember when David Cassidy was making hits, then the time to act is overdue as aging bathrooms usually also have waterproofing issues. 2. Money in the bank You can afford to decide whether you want to pour your hard-earned cash into your existing home, or climb the property ladder and find a superior property. Or if you’ve paid down a lot of your current home loan, you may be able to redraw to fund a renovation. 3. You intend to stick around If your home is well located, you may opt to stay and maximise the potential rather than move. However, if you favour a renovation, be aware that upgrades offer the best payback when you sell within a year or so of the work being completed. Your new kitchen doesn’t stay new forever although it is likely to give you a lifestyle benefit for at least a decade. 4. Big squeeze If your current home is getting too small, you’ve got the option of building an extension, but that means you’ll have to battle the planning process as well as the stress of selecting an architect and builders and perhaps paying rent while the work is being done. If the rebuild is so big that you need to move out anyway, a new home might be a more straightforward option here. 5. Living in the 70s Many owners who take the upgrade path want to modernise their homes. They’re fed up with the rabbit-warren design of small, disconnected rooms and yearn for open-plan living, plus a new kitchen and bathroom. Making such fundamental changes are expensive, and it is worth checking out the prices of more modern homes nearby before going ahead with a renovation. That will help you understand the value that you’re adding. 6. Dead space Poor design can result in some rooms being ignored, either because of their size or their position relative to the main living areas. Real estate is not cheap, so this is very wasteful. If fixing the problem is difficult, finding a new, better-designed property will pay off for you financially in the medium to long-term while also helping you take the next step on the property ladder. Give us a call on (03)8657 8664 to have a chat about the best way to fund your home improvements.

Tax Deductions for Investment Properties Explained

By Kola Dev • August 5, 2024
Owning an investment property is a little like running a business. It provides a great source of income and builds personal wealth but inevitably comes with a series of costs that hit your bottom line. The excellent news for property investors is that many of these expenses are tax-deductible. Tax advantages are not just available on new properties. While an older building may have limits on what you can claim, you do not have to buy a new house or apartment to qualify for tax benefits. There are two components of a tax claim for a rental property. These are: Capital Works Allowance covers the structure, such as walls and roof tiles; and Plant & Equipment covers the so-called removable assets such as carpets, stoves, and hot water system.  You should always obtain professional accounting and tax advice to understand exactly what can and cannot be claimed according to your own specific circumstances as the Australian Tax Office changes the rules regularly. For example, only investors of new property can make claims under plant and equipment assets. However, exclusions exist for those properties that have been renovated. Those who own older properties can continue to depreciate items that fall under the capital works component, so long as it was built after September 15, 1987. And you may benefit from depreciation even if a previous owner undertook improvements. So, working out what you can claim legitimately requires the eagle eye of a professional. In general, you will find the following items are tax-deductible: Costs associated with a property manager, which are usually 3-8% of rental income Accounting and professional financial advice Advertising if required to find new tenants, plus associated re-letting costs Strata levies Rates and land tax Insurances Loan interest and ongoing loan fees Also, work with your accountant or financial adviser to build a tax depreciation schedule for your property. This document will list all the items in your property that qualify for depreciation. It should only need to be completed once, and it can then be submitted to the ATO each year to ensure you obtain the maximum possible tax benefits from your rental property.

A Guide to Purchasing Your First Investment Property (and Beyond)

By Kola Dev • July 1, 2024
Investing in property isn’t rocket science but there are a few rules savvy investors should follow for success. Here are some things we’ll cover in the next couple of weeks to get you started. Should I invest? Investing isn’t right for every one.The first thing you need to do is make sure you’re in the right financial position to take the risk. How do I build a strategy? Before you start your journey you need to do plenty of research and build a strategy around your specific budget and financial needs. How do I choose the right loan? Once you get your finances in order, start shopping around for a great loan. Make sure you get pre-approval from your lender before you start looking for your investment property. How will I manage my investment? It’s important to remember that an investment property is a long term commitment and you need to know how you are going to manage it over the life of your loan. With the right advice and loan, property investment can be the most satisfying and profitable decision you make. If you have any questions or want to discuss whether property investment is right for you, contact us on (03)8657 8664 or email us at reception@futurefinancegroup.com.au
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