SHAHEED SUKHDEV COLLEGE OF BUSINESS STUDIES

Made By: Ankita Chadha (8151) Khushboo Gandhi (8159) Tushar Garg (8164) Barkha verma (8119)

Introduction
A zero-percent loan could be a great deal as long as you are careful to read the fine print and promptly pay off the loan. Otherwise, you could be inviting financial trouble. How do these schemes work? Firstly these zero percent schemes have hidden costs inbuilt in them. Perhaps the biggest loss for you would be forfeiting the cash discount on a product that you could have otherwise got if you had bought it on full cash. This apart you will also be paying a transaction or processing fee under the zero percent scheme and consequently more money through advance EMIs. For example, you decide to buy an LCD colour television that costs around Rs. 48,000. You decide to buy it using the zero percent finance scheme. Under this arrangement you will pay the entire cost in six EMIs of Rs. 8,000 for six months. This works out to be Rs. 48,000 spread over 6 months. Now heres how you end up paying more! To begin with you pay a processing fee of Rs. 1,000. And since you are buying the LCD on a zero percent finance scheme you are not entitled to the cash discount of Rs. 2,000! So heres how it looks in the above example. The LCD costs Rs. 48,000! Add up the Rs. 1,000 processing fee that you pay initially and Rs. 2,000 that was lost out on cash discount. A total of Rs. 3, 000! This means you get a net finance of Rs. 45,000 only! Now you pay an EMI of Rs. 8,000 for 6 months which totals up to Rs. 48,000. So at the end of six months you pay Rs. 3,000 more for what you got. Here are some common pitfalls associated with zero-interest loans: The 0% offer could come with a very high interest rate that kicks-in after the grace period. For instance, you could end up paying a loan interest of 21 percent after only six months at zero-percent interest. You could lose the zero-percent rate and be charged a penalty of back interest on the amount borrowed if you fail to make your scheduled payments when due. You may be required to make a large down payment to qualify. You may be required to repay the loan in a shorter period, such as 24 months.

For vehicles, you may be required to pay the sticker price ("MSRP") for your new car, rather than be able to negotiate a lower price. Till a few years ago there were many such zero percent finance schemes doing the rounds and luring the unaware buyers into it! But thanks to the regulations of the Reserve Bank of India (RBI) many banks have now stopped from offering such schemes for financing consumer durables. But still there are several NBFCs who continue to offer these so-called zero percent finance schemes! These schemes do tend to have a big influence if you are someone looking to buy something, which otherwise would be well beyond your reach! You buy their theory of zero percent finance and pay installments which you strongly believe are interest free! But unfortunately you end up paying more than what you actually think you are!

Four biggest banks offering top customers cheap loans

The four biggest U.S. banks are encouraging their most creditworthy customers to take on more debt, mailing credit card balance-transfer offers with rates as low as zero even as they add fees for other services. Bank of America Corp., the largest U.S. bank by assets, is offering some customers a teaser rate of zero percent plus transaction fees through June. A teaser rate is a low initial interest rate on an adjustable-rate mortgage to entice borrowers that is later eliminated and replaced by a market-level rate Customers who receive the promotions with balance-transfer checks may deposit the checks to use like a short-term loan, rather than paying off a balance at another financial institution. A one-time fee of $10 or 4 percent, whichever is greater, is charged per transfer. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. are sending similar promotions. The offers come as the banks add fees for checking accounts to make up for lost revenue from federal rules on debit-card swipe charges. The rates may be a good deal for customers who can precisely follow the terms, as the average rate for an unsecured personal loan is 13.96 percent, said Greg McBride, senior financial analyst for Bankrate.com, which provides consumer rate data.

Some customers of JPMorgan, the second-largest lender, who receive such offers may write a balance-transfer check to themselves for as much as $5,000 to take out a zero-interest loan for as many as 15 billing cycles. Citigroup, the third largest, is offering some customers 0.99 percent on balance transfers through February 2013. Existing customers may deposit balance-transfer checks into their bank accounts to use as cash. A one-time fee of $5 or 3 percent, whichever is greater, is charged per transaction, according to Citigroup's terms. Wells Fargo is extending similar offers at rates from zero to 6.9 percent.

Wells Fargo Offers 0 Percent Origination Fee Federal Stafford Student Loans Nationwide
Company to pay origination fee Wells Fargo & Company is a diversified financial services company with $453 billion in assets, providing banking, insurance, investments, mortgage and consumer finance to more than 23 million customers from more than 6,200 stores and the internet across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the United States to receive the highest possible credit rating, Aaa, from Moodys Investors Service. Wells Fargo has more than 30 years experience in education financing and is one of the nations leading student loan providers for both federal and alternative student loans. Wells Fargo Education Financial Services, a division of Wells Fargo Bank, N.A., announced that it will offer 0 percent origination fee Federal Stafford Loans nationwide for the 2006-2007 academic year, allowing students to keep more of their loan money for education costs. Wells Fargo is committed to helping students reach their next stage of success, and a more affordable Federal Stafford Loan will help them do that, said Jon Veenis, president of Wells Fargo Education Financial Services. Were paying the origination fees so students will have more money up frontwhen they need it the mostfor books, tuition, fees, and all the other costs of education. This is just another way we put the best interests of our customers first.

The Federal Stafford Loan is a low-interest, government-guaranteed loan for both undergraduate and graduate students. Borrowers normally pay an origination fee 3 percent of the loans principalto the government. With this new offering, Wells Fargo will pay the origination fee on the students behalf. New Wells Fargo Federal Stafford Loans guaranteed on or after April 1, 2006, will be eligible for the 0 percent origination fee savings. Wells Fargo also offers generous repayment incentives on Federal Stafford Loans. With our new 0 percent origination fee Federal Stafford Loan offering, our competitive repayment incentives, and our comprehensive suite of alternative loan products, financial aid professionals can feel even more confident recommending Wells Fargo as a smart choice for borrowers, said Veenis.

New Citi Simplicity Card Offers 0% Interest, No Late Fees, No Penalty APRs

Citibank seems to be on a mission to be named 2011s King of Low Interest Credit Cards. Every few weeks it seems like we come across an announcement for a new and improved no-interest offer from them, with the latest being the Citi Simplicity card. A quick perusal of their current card lineup shows that the Citi Platinum Select ,the Citi Diamond Preferred, and this new card are all offering 0% interest for 21 months on both purchases and balance transfers. And with the Thank You Preferred offering the same deal for 15 months, the bank now occupies the top 4 out of 5 slots in both low APR rankings, and balance transfer rankings.

Low Rates, No Fees, No Gotcha Penalties

The Citi Simplicity offer sets itself apart from the pack in a few key ways. Most of these are features you wont find on any credit cards not offered by Citibank, and theres not a single bank credit card that offers all of them together: 0% interest on balance transfers for 21 months: For those carrying balances on high-rate cards, this will inevitably save them a ton of month in interest charges. Even after the 3% transfer fee, this is a huge savings. And outside of Citibanks arsenal, you wont find another card offering no interest for almost two years. 0% interest on purchases for 21 months: This might even be a bigger deal, because most balance transfer offers are meant to lure you in with low interest promises, while charging you high rates on anything you buy in the meantime. With the Simplicity, however, you avoid paying interest on anything until the promo period is over. No Late Fees: Have you ever been a few days late on a payment and gotten hit with a penalty? It hurts. Most banks will try to hit you with the legal maximum for even the most minor infringements, and only credit union cards ever waive these fees. Well, now we can say only credit union and Citibank cards. No Penalty APRs: The only thing that might hurt worse than a late fee penalty is the sky-high APR that most banks will start charging you on purchases, to penalize you for your discretions. Most of the time, these rates are as high as 29.99%. This is another area where Citibank is bucking the trend and acting a bit more like a consumer-friendly credit union.

Zero Percent Stability Transfer Credit Card

Zero percent credit cards are blooming like wild grass; you should know how to differentiate the flowers from the weed. Several major credit card issuers, including Citibank, Fleet, American Express, Discover and First USA, are pushing credit cards with zero-percent interest rates. Today, credit cards are a huge business and acts as significant revenue for many companies, banks included. There is little wonder why credit card companies are

going all out to get new credit card users all the time, even to the extent of desperation. There is a fortune to be made off credit card finance charges alone. The annual percentage rate (APR) on credit cards range from 11% to 16%. Even high risk investments today find it difficult to give returns beyond 16% a year. Naturally, it's not going to be to be easy trying to pay off your credit balance. Especially when you are able to pay off the interest and it keeps adding on to your principle. But that appears to be exactly what the companies are looking out for, although bad credit was a down side to that strategy. The annual percentage rate (APR) is what 0% Credit Cards costs you. Lower Interest rates means lower payment. No interest is charged to you at zero percent Interest rates. These provides generally extend to a period of six months or perhaps up to a 12 months. This gives a much-needed stretch during which you can knock down your balance and get your finances again on the right and thin. With customers with good credit getting scarce in the market, credit companies are out to poach customers to their side; and that is how the balance transfer schemes came to be. These usually involve zero percent interest rate offers for customers who transfer their balances from one card to another. Needless to say, an obvious benefit to zero percent interest rate is the interest free loans. But besides saving money on the interest free period, you can actually make the best use of the offer to catch up on your loans. Almost all the credit card companies give you a zero percent APR deal of just one sort or any other as a sign on promotion. If you are struggling to make your greeting card payments and the struggle will be dragging a person down towards a bad credit report, such an offer will repair it for you. This isnt magic, but a prudent use of an opportunity that key credit card companies use to attract customers. For you, it could be a saving grace. During the offer period, you should try to pay off as much debt as possible so that when the offer period expires, you will have much less balance and therefore less to pay on debt interest. The money that originally goes into the paying off the interest can easily pay off at least 10% of your principle. And if you're conscious about paying off your debt, you should be able to reduce your debt enough more.

Subsequently, your APR should be much lower and the money saved can continue to be used for paying off more debts each year. When you have reached the end with the zero percent Annual percentage rates, these particular zero percent credit cards will return to common interest rates and costs. At this point with time, if you caught to the strategy, you will have fixed your credit debt problems and also dodged a round. Besides paying off your debt, some advance players even make use of the offer to make money out of the opportunity. They leverage on the zero percent interest rate and maximize their financial potential on the borrowed money. This is of course, taking a high risk with their money, since they could possibly rack up a lot more cost if their plan falls through. While this all sounds good, it is most to get a clear understanding of what are the terms and conditions attached. Not everyone qualities for the zero percent interest rate offer, and getting and invite to sign up for one isn't a criteria for qualification. You could sign up for the offer and end up not enjoying any benefits at all. Even if you qualify for the offer, it could easily lapse if you default on payment or breach any of the term and conditions listed in fine print. Normally it is most advisable for you to transfer the balance with the highest payable interest amount to the zero percent interest card to maximise your savings, and that usually refers to your largest credit balance. But note that it takes a while for the transfer to be processed and you may still need to be paying off your interest to the old company for a while. It may sound like there's nothing in it for these credit card companies. But the truth is, most people out there have very poor financial diligence (no one knows why), and that is how much of America is a debt nation today. Credit card companies are really betting on you not paying off your balances and leave them as it is. So when the offer period ends, you end up paying them the same amount or even more. Companys use the promise of a zero percent interest credit card as an incentive to attract customers. But consumers fail to read the fine print and banks conveniently forget to alert them that the 0% APR is an intro period benefit and will eventually be dropped. The cruelty of this trick is magnified when you consider the benefits you can obtain from a credit card. Credit cards can come with a number of rewards. Such

as, balance transfers, cash back, no introductory or annual fee and other great benefits. However, when you purchase a zero percent interest credit card that is your reward. You will have a few months of no APR and after the intro period you will have a normal credit card, with a normal interest rate with absolutely no benefits. If you had simply sought out a card with benefits in the first place you could find yourself with a much more effective credit card. Even the best balance transfer offers cant beat a low interest card in the long run. The only time a zero percent interest credit card might be useful is if you know you will have a large amount of expenses coming up. If you can plan your finances accordingly you can use this credit card as an effective zero percent loan, as long as you are able to pay the money back before the zero percent interest benefit runs out. In essence, you do not want to seek out a zero percent interest credit card with the hope that you will never have to pay any interest on any of your purchases. This is simply impossible. However, if you can take advantage of the time frame given, perhaps it is a card worth looking at.

Rebate or Low Rate Financing: Which is better for you?

Zero percent car loans: Are they worth it? Even so, if you are shopping for a car, tread with caution. While a zero percent or low-interest car loan may seem enticing, it may cost you more than getting a loan through a bank or credit union would. First, zero percent car loans and low-interest car loans are given only to those with the best credit -- typically only 10 percent of shoppers. If you do qualify, it's likely you'll pay more for the car since dealers are less likely to haggle on price when they know that they won't be making any money on the car loan. Even paying an extra $1,000 for the car makes a difference. For example, $26,000 versus $25,000 adds about $16 more to your monthly payment for a five-year loan at zero percent. To combat this, don't mention the zero percent or low-interest rate until after you've negotiated the car's purchase price.

Even if you do negotiate wisely and get a rock-bottom price, it still may make more sense to forgo the manufacturer financing for two reasons. First, many zero percent or low-interest car loans have shorter finance terms, which in turn may take your monthly payment out of your budget. Second, it's typical that cash-back rebates don't apply for buyers using the manufacturer's special financing. For example, if the zero percent car loan or low-interest manufacturer loan is for four years in instances when you would typically finance for five years, the cost difference can be dramatic. On a $25,000 car loan through the manufacturer for four years, your monthly payment would be about $520 at zero percent interest or $541 with a 1.9 percent interest rate. If you opted for the manufacturer rebate and a five-year loan term through a bank or credit union, you'd spend more on interest but your monthly payment would be substantially lower than the four-year manufacturer loan. For example, with a $2,500 manufacturer's rebate, you'd lower your financed amount to $22,500. At a 5 percent interest rate, your monthly payment would be $424, while at a 4 percent interest rate your monthly payment would be about $414. If the length of the loan is the same between the manufacturer's special offer and the bank or credit union, the difference isn't as dramatic, but taking the manufacturer rebate and getting a bank or credit union car loan is almost always the better option. On a $25,000 car with a choice of a $2,500 rebate or 1.9 percent financing over five years, it's a better deal to take the manufacturer rebate and get financing elsewhere. At a 4 percent interest rate with the $2,500 rebate, you'd save $1,364 in total payments. With a 5 percent loan rate with the $2,500 rebate, you'd still save $750 over the life of the loan. Zero percent financing offers aren't always the best option. So, as far as you are concerned, a loan at zero percent interest means that you pay no interest you borrow 10000, you pay back 10000 over the term. However in reality, as far as the loan company is concerned, when they lend money they want interest They have to show a profit. Where does this profit come from? Who pays the interest- the interest that is not shown on your agreement? You? Or does the car dealer pay it for you because they love you so much?

Both, actually. The car dealer pays the finance company behind the scenes, separate from your loan agreement. May be they go without their commission and/or physically pay them in hard cash. Either way, the car dealer ends up paying the interest on your loan! How can they do that? It comes out of your pocket. The dealer will have already factored the cost of the finance into the several deals they are giving you. It may be that they have already increased the price of their car to cover it. It may be that they actually give you less than the Trade price for your car. It may be that they give you no discount at all on the car they are selling you or any combination of these. Unfortunately, there is no law to stop dealers from manipulating figures; it would be too hard to prove even if there was. They can put down any figure they want and say that is how much they gave you for your car. They can put down any figure they want and say that is what they charged you for their car. They do this to make you believe you are getting something special- You are not! Free- insurance, warranty, breakdown cover? No, you pay! You often see adverts for cars where they say that they will give you 1 years free insurance, free warranty, 1 years free AA breakdown cover, etc. This falls into the same category as zero percent finance- anything you get free will be paid for By you! Nothing is free. For example: if it costs them 200 pounds to give you 1 years free insurance, they will make sure that they get these 200 pounds from you by giving you less for your car, or charging you more for their car, or selling you a less than favorable finance deal where they make extra money. You never get something for nothing! So what will it be, the rebate and financing at your Credit Union, or taking the low, may be even 0% financing, at the dealer? On the surface, a zero percent loan, or even 1% or 2% rate loan, sounds like free money. You would not be alone to think that a low-percentage loan is the better deal. Especially when you are at the dealership and the sales agent brings out the sales contract, smiles, and asks if you will be taking the manufacturers financing special. Still, there is only one question you really need to be considered with: which option will cost you the least over the life of the loan? Here is a rule of thumb to keep in mind while you shop:

Rule of Thumb: Over the life of the loan, paying less for the car up front saves more than saving on the finance rate. Example: Consider this example that compares an interest rate of 6.0% and a rebate to 0% percent financing: Purchase price: Rebate: Sales tax: Trade-in credit: Amount you owe on your trade-in: Dealer offer: $20,000 $2,500 7%1 $5,000 $4,000 Zero percent financing or $2,500 rebate. (You dont get both)

Which is better? If you take the rebate, and finance at 6% for 48 months, you will save more than $250 over the life of the loan. By paying less for your car up front, you almost always save more in the long-run.

There's Nothing Sweeter than a Zero Percent Interest Loan

Those advertisements offering a zero percent interest loan fail to tell you one thingyou need nearly perfect credit to qualify. Yes, a zero percent interest loan is great to those who qualify, but for the average person with below average credit, the chances of getting a zero percent interest loan are about as good as the tree in your front lawn sprouting money instead of leaves. Normally, a zero percent interest loan charges you no interest for a certain time, then the rate spikes up pretty high when that promotional period is over.

Take care with your zero- percent credit card

Once you manage to land a zero-percent credit card deal, before you go out and celebrate -- grab a magnifying glass.
"If

you have good credit this is definitely a good chance." If you follow the rules, you can't get any better than zero percent. But one should not forget to consider the following points: Is that interest-free introductory period for purchases or balance transfers or both? When does the introductory period end? What kind of interest rate will you pay then? If the zero-percent teaser rate is on balance transfers only, avoid making any new purchases with the card. Issuers have a policy of applying payments to balances with the lowest interest rates first. You'd have to pay off the entire balance transfer before a single penny gets directed to any new purchases you've made with the card. This is not the credit card to take with you on your next trip to the mall. If you do, you could end up paying a truckload of interest on a $50 sweater. Be on the lookout for fees. Some cards charge you a fee for every balance you transfer to the card. Both First USA and Citibank charge a fee equal to 3 percent of the balance being transferred. First USA caps its fee at $35. Citibank's fee is capped at $50. It's best to avoid offers with hefty transfer fees. You'll also want to be quick with your card payments. Pay late even once and that zero-percent interest rate will disappear for good.

With the Discover platinum card you pay zero-percent interest on purchases and balance transfers through November 2002. That's a pretty nifty deal, but all that changes if you're tardy with a payment. Pay late once and a 12.99 interest rate snaps into effect. Pay late twice and you'll be stuck paying 19.99 percent on all balances. Let's not forget about late fees. At Discover, you pay $15 to $35 late fees depending on your card balance. With Fleet's Titanium Smart Visa you pay zero-percent interest on new purchases for eight months. But if you pay late you'll be slapped with a $35 late fee and charged a penalty interest rate of as much as 21.99. Ouch. A super-duper interest-free card deal can stop being free pretty darn quick. Don't let this happen to you. Pay that card bill on time every month.