Originally Posted by z71tiger
You think no one is profiting off of 0%? Why would someone offer 0%? First, to get 0% you are paying full retail, no discount. Second, statistics show that 88% of people will not pay that loan off in time and start paying the outrageous interest rate that dates all the way back to when the loan originated. Bottom line, banks will get money.
The type of 0% you are talking about is unsecured credit card promotional offers. This is not the same as 0% on a secured loan such as a mower. There are also different type of 0% credit card offers. One is a promo offer to get you to get a credit card from a certain company. These are teaser rates and only apply for the first few months of purchases. Card companies also offer 0% balance transfers which they generally charge you either a flat fee or a percentage of the balance.
Store credit cards offer 0% interest for 6, 12, or even up to 24 months. I'll use Home Depot as an example. They offer 0% for 6 months on purchases over $299 on their Home Depot Card. If you pay that off within the 6 months you do not pay the interest. That interest does not just disappear. The store pays that interest to the bank. If you do not pay it off within the 6 months you get hit with all the accrued interest from the date the purchase was made. It is a win win for the bank. They get paid either way. The store is betting you will not pay off the purchase and therefore the store will be absolved of paying the interest. In the event you do pay it off the store looks at that as a small price to pay for the revenue that was generated by the purchase.
I would like to see a link to your 88% statistic. I did a quick search and could not find that number.
Banks make money on 0% secured loans by dealers buying down your rate. For instance 0% car loans the rebates get sent to the bank from the dealer. If you get 0% or a standard loan it is generally a wash. You will end up paying the same amount over the life of the loan. On mower loans, the amounts are much lower as compared to vehicles so banks do not make as much. In some cases the banks do not make much if any more than the loan origination fee. That is also why loans with little collateral are much harder to get. You need much better credit to get 0% on a mower loan than you do for a vehicle loan. Regardless though, you need very good credit to qualify for 0% from any company be it secured or unsecured.
My 0% loan on my mower was a good deal for me. If you can qualify for 0% on a mower it will probably be a good deal for you too.