Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Deferred-interest loans

A ticket to free financing or too good to be true?

A deferred-interest loan comes with the promise of free financing if you can repay your loan before the promotional period ends — usually within a year. But make sure you understand all of the terms and conditions before you sign up. Misunderstanding the rules could mean you'll end up paying more than you expected.

What is deferred interest?

Deferred interest is interest that doesn’t start accumulating until after a promotional period. Usually this runs from 6 to 12 months on loans — and usually up to 9 months on credit cards.

Deferred interest is most common when you sign up for in-house financing on a big-ticket item. You’ll find these loans at retailers, doctor’s offices or hospitals and car dealerships — and they’re particularly popular around the holidays. 

Banks, credit unions and online lenders typically don’t offer these kinds of deals.

Is deferred interest the same as a 0% APR offer?

No, a deferred-interest loan is not the same as a true 0% APR loan. This also applies to credit cards that have a 0% promotional offer. A 0% APR loan would never charge interest or fees at any point in time.

How does deferred interest work?

Deferred interest works by holding off on interest during a promotional period — typically 6 to 12 months. If you pay off the loan during that period, you won’t pay any interest at all.

But once that period ends, interest starts to add up. How this works depends on your contract. Usually, deferred-interest loans come with higher rates than you’d find on most personal loans. It’s not uncommon for deferred interest rates to top 20% — closer to what you’d pay with a credit card.

Can you still end up paying interest?

Yes, if you don’t repay the loan in full by the end of your promotional period, you will pay interest on the remaining balance. At the very least. 

Some deferred interest contracts will charge retroactive interest — as if you had been charged interest from the day you took out your loan. Making a late payment or otherwise violating the contract can also trigger interest in some cases. Don’t sign up for a deferred-interest loan without fully understanding the terms and conditions.

Does deferring interest hurt your credit?

A deferred-interest loan won’t hurt your credit score if you make repayments on time. Even if you don’t fully repay the loan before the promotional period is up, it can still improve your credit by adding to your history of on-time repayments.

But if you don’t budget for a repayment that includes retroactive interest, you might miss multiple repayments and damage your credit. Don’t count on repaying the loan before the promotion is up. Get an estimate of the cost after that period to avoid missing a repayment and damaging your credit.

See personal loan options without deferred interest

Use the table below to compare lenders that don’t offer deferred interest on their loans. Select your credit score range and state to find out which lenders you might qualify with.

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link

Spring Financial Personal Loan
Finder Rating: 4 / 5: ★★★★★

Spring Financial Personal Loan
17.99% – 46.96%
$500 – $15,000
9 – 48 months
Min. income of $1,800 /month, 3+ months employed
Min. credit score: 500

Go to site
More Info

An online lender offering unsecured personal loans and credit builder loans. If you're not eligible for an unsecured loan, you may be offered a loan to help rebuild your credit.

LoanConnect Personal Loan

LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
$500 – $50,000
3 – 120 months
Currents debts must total less than 60% of income
Min. credit score: 300

Go to site
More Info

An online broker who helps inform clients towards better finances. Get pre-approved by different lenders for unsecured or secured loans in 5 minutes with any credit score.

Mogo Personal Loan
Finder Rating: 4.5 / 5: ★★★★★

OFFER
Mogo Personal Loan
9.90% – 46.96%
$200 – $35,000
6 – 60 months
Min. income of $13,000 /year
Min. credit score: 500

Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.

Go to site
More Info

An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.

goPeer Personal Loan
Finder Rating: 3.6 / 5: ★★★★★

goPeer Personal Loan
8.00% – 33.92%
$1,000 – $25,000
36 – 60 months
Recommended income of $40,000 /year, no payday loan debt
Min. credit score: 600

Go to site
More Info

Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.

SkyCap Financial Personal Loan
Finder Rating: 4.1 / 5: ★★★★★

SkyCap Financial Personal Loan
12.99% – 39.99%
$500 – $10,000
9 – 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550

Go to site
More Info

An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.

Fairstone Unsecured Personal Loan
Finder Rating: 3.9 / 5: ★★★★★

Fairstone Unsecured Personal Loan
26.99% – 39.99%
$500 – $25,000
6 – 60 months
Able to make monthly repayments on your loan
Min. credit score: 560

Go to site
More Info

An online lender with a team dedicated to professional service. Get a quote for an unsecured loan without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.

ConsumerCapital Personal Loan
Finder Rating: 3.2 / 5: ★★★★★

ConsumerCapital Personal Loan
19.99% – 34.99%
$1,500 – $12,500
24 – 60 months
Min. income of $1,900 /month, 6+ months employed, no payday loan debt
Min. credit score: 600

Go to site
More Info

An online lender that provides fast unsecured personal loans. Complete an application in less than 10 minutes and get a decision within 24 hours. For faster loan approval, complete the Flinks bank integration in the app.

Loans Canada Personal Loan

Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 – $50,000
3 – 60 months
No min. income or employment requirements
Min. credit score: 300

Go to site
More Info

An online broker with the largest lender network in Canada. Get matched for free with lenders offering both unsecured and secured loans through one quick application regardless of your financial situation.

FlexMoney Personal Loan
Finder Rating: 4 / 5: ★★★★★

FlexMoney Personal Loan
18.90% – 46.93%
$500 – $15,000
6 – 60 months
Min. income of $2,000 /month, 3+ months employed
Min. credit score: 500

Go to site
More Info

An online lender offering flexible unsecured loans. Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan at any time.

Loan Away Personal Loan
Finder Rating: 3.6 / 5: ★★★★★

Loan Away Personal Loan
19.90% – 45.90%
$1,000 – $5,000
6 – 36 months
No min. income or employment requirements
Min. credit score: 300

Go to site
More Info

A lender that approves unsecured loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.

Fairstone Secured Personal Loan
Finder Rating: 3.7 / 5: ★★★★★

SECURED
Fairstone Secured Personal Loan
19.99% – 23.99%
$5,000 – $50,000
60 – 120 months
Must be a homeowner
Min. credit score: 560

Go to site
More Info

Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
loading

Compare up to 4 providers

Pros and cons of deferred interest

Deferred interest might seem like all benefits at first glance. But there can be some major drawbacks. Here’s how you can benefit from these loans — and why you might want to stay away.

Pros

  • Potential interest-free loan. Repay it before the promotional period is up — according to the terms and conditions — and you’ve got yourself interest-free financing.
  • Easy financing. In most cases, deferred-interest loans are available at check out when you’re paying for your big ticket item.
  • Manage expensive purchases. Like any loan, deferred-interest financing breaks up a big ticket item like a car into more manageable repayments.

Cons

  • Potential retroactive interest. In some cases, you could end up paying interest on the original balance of the loan.
  • Typically higher rates. While rates on your average personal loan hover around 10%, interest on these loans can be 20% or higher.
  • Few opportunities to compare options. Deferred-interest loan offers are often presented at checkout — when you might not have the chance to compare other deals.

Bottom line

A deferred-interest loan can be better than it seems — and it’s a risk. Even if you think you can pay off the loan within the promotional period, there’s a chance something will happen that will affect your future income.

If you don’t pay it off before that 0% APR period is up, then you could end up paying more than you would have with a regular personal loan. Before you apply, compare our top picks for personal loans to see if you can find a good deal without that risk.

Frequently asked questions

More guides on Finder

Ask an Expert

You must be logged in to post a comment.

Go to site