Windows On Finance – Beware of double glazing interest free credit
With the current dire events going on in the world in 2023 including rapidly rising interest rates, more and more double glazing companies are offering interest-free credit to help you buy your new windows on finance that you might otherwise struggle to afford. But how does it work? And will it land you in trouble?
What is interest free credit?
This might sound like a stupid question, but in reality, there is no such thing as being able to borrow money for free, someone has to pay the interest! For the consumer interest-free credit agreements allow you to borrow an amount of money over a set period with no interest charged. They often don’t even require a deposit, which means you don’t need to part with any cash until the first direct debit payment after your installation has happened. Some schemes offered by our national and local rivals currently include ‘pay nothing for a year and then pay the balance over 4 years’. You can usually however, choose to put down a larger deposit, which will reduce your monthly repayments.
For the double glazing retailers the options are much different. The credit agreement fees or interest are charged back to the company when the work is completed. When you sign the satisfaction note after your windows and doors are installed, the glazing company sends this back to the finance company for them to pay for the job. The interest payment, in a market of rising interest rates is very high. The cost of a buy now, pay nothing for a year and then spread the balance of payments over the following four years will probably cost the retailer as much as 20-25%. The fee or interest is deducted from the amount paid to the retailer by the finance company.
Now you can call me cynical but there are only two ways this can be achieved. Firstly the retailer is charging extra on the job for the additional finance cost (totally illegal of course) as it could hardly be classed as interest free OR they are taking a massive hit on their margins. KJM have been trading for forty years and in that time our best net profit margin has been no more than 10%. Therefore KJM could never operate such a ‘interest free’ scheme unless we drastically raised our prices to cover the cost, so once again hardly interest free!
Please remember finance companies don’t just hand out deals to anyone — you will need to meet eligibility criteria which may differ from different window and door companies. Your application might be online or in person, but either way there will be a lengthy form to fill out. You will need to provide details such as your employment status and a history of addresses. A credit check will be carried out where they will be looking for a good, clean history of repaying debts, including credit cards, loans and mortgages.
Assuming you are happy with your deal what’s the catch?
“Free money” is always good but don’t be tempted to overspend. The idea is to spread the cost over many years, not to rack up a bigger list of debts. Interest-free credit deals are formal loans with a contract, so you need to be sure you can afford to make each and every repayment to protect your credit status. The loan will usually be with a lender on behalf of the retailer. Should you become unable to make the repayments you will be subject to extra charges, with the case of finances companies this could mean eye-watering interest rate and it could land you with a court date and a blemished credit record. You should also consider the effect numerous loans will have on your credit rating. A lengthy list of borrowing could be troublesome when the time comes to re-mortgage, as banks and building societies will be wary of those with lots of debts, especially when interest rates are rising so rapidly, as this will affect the affordability of loans
Buy now pay later deals on double glazed windows and doors
Whilst writing this blog please don’t confuse interest-free credit with buy-now-pay-later finance deals. These almost always charge high levels of interest and if the rates are very low, they are probably being subsidised by the retailer again with higher costs. KJM as a company are currently looking at finace suppliers so we can offer a ‘one-stop shop’. Finance has changed over the years, generally there are now deals that include a fixed rate of interest over the term of the deal. Way back this was never the case and finance was almost like putting debt onto a credit card.
Are interest-free credit cards a better option?
There is another way to spread the cost of a shopping spree without signing up to a string of credit agreements, and that’s by using a credit card offering 0% on purchases, sometimes for quite long periods. Check out the moneyfacts.co.uk comparison website for the best deal at the time you need it. At the moment, the card offering the longest period at zero per cent is from Sainsbury’s Bank. Its Purchase Credit Card gives you three months to spend, and you won’t pay a penny in interest on the balance for 31 months. Referring to Sainsbury’s Bank website it is very important you make sure you are able to repay the full amount before any interest-free period offer is up. After this, the rate reverts to over 18%. Transferring a balance to a 0% card normally has a transfer % fee
Conclusions – Buy now pay later or Interest free credit for your windows and doors
Hopefully you understand that the purpose of my blog is to inform you. I’m not aware of any bank or finance company offering loans of £000’s over multiple years without charging interest. This means, the retailer offering these deals is funding the cost with increased margins. In my opinion this could hardly be called ‘interest free’. Finance is also used as a closer on a sales pitch and the final push for a ‘sale on the night’ Once in lifetime deals are not common, so don’t be duped by them.
If any glazing company is offering these deals, before signing on the dotted line I would suggest a comparative cost from KJM or another supplier local to you.
KJM Group supplies an extensive range of low maintenance and energy efficient windows and doors, throughout Hampshire, Berkshire, Surrey, Dorset, and Wiltshire. This includes secondary glazing, casement, tilt and turn and vertical sliding windows and doors in PVC-U, timber and aluminium and energy saving triple-glazed windows with U-values as low as 0.5 W/m²K.
For more information on our range of energy efficient windows and doors please don’t hesitate to call or email me or the sales team on 01264 359355