I know most people think that once they get a zero percent loan on a purchase, that it would never make sense to accelerate paying that debt off.  There are a few times, however, that paying off a zero percent loan makes a lot of financial sense.

 

1.  When you need to make room for another debt.  Paying down any kind of debt makes sense, if you know you will have to borrow again soon.  If you borrowed $1,500 for a new bed at  0% for example, that amount will count against you when you get ready for a more serious purchase, such as buying a car.  Your lender always makes the assumption that you will be paying the minimum to that loan for the lifetime of the car purchase, even if you only have 1 payment left.  Get rid of that extra loan, so you credit will show the bank you are more prepared for a loan, and you deserve that loan at a lower interest rate.

 

2.  When you have income spikes.  Some people will get occasions to earn extra money, such as overtime.  The problem with temporary boosts in income is that people very quickly start needing that income all of the time.  Placing that extra income into paying off debts, even at 0% interest will give you a chance to get ahead, and also keep you from depending on that income when it eventually goes away again.

 

3.  Because it's practicing a good habit.  Most of your financial health is related into getting into good habits.  If you are seriously contemplating paying off an interest free loan, more than likely you've paid off loans that had interest, and that you've gained some good (GREAT!) habits in paying off debts.  Keep that good habit, and pay off your interest free loans as well.  Having such a wonderful habit in itself is a great value, and may pay you more than if you put your extra money elsewhere.

 

A lot of "financial experts" have a tendency of telling you that it is NEVER a good idea to do one thing or another.  The fact of the matter is, you have to see whether or not it makes sense for your own situation.  Every so often, you will find that one of these things that will NEVER work in any situation will actually work quite well for you.

 

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