‘Same As Cash’ Offers: What’s the Catch?

Perhaps you’ve heard it before: six months same as cash. The offer pops up frequently at furniture stores, appliance stores and with contractors offering a deal to fix your furnace. These kinds of deals can sound tempting, but they can be troublesome if you’re not careful. How do they work? Are they ever a good idea? And what other options can you leverage instead? Read on to find out.

How Do Same As Cash Offers Work?

Same as cash offers are often considered financing options of last resort. They’re typically tailored to borrowers with low credit who won’t qualify for other financing options. While you can certainly take advantage of these offers, you definitely need to understand how they work first.

Oftentimes, consumers assume that a six months same as cash offer means they won’t pay any interest for the first six months. This is actually not how these offers work. Instead, you can go six months making minimal payments, or sometimes no payments at all. But if you don’t pay the entire balance by the six-month deadline, bad things could happen.

Let’s say you take out a six-month same as cash loan for $5,000 to buy new furniture. You understand that the loan has a 24% interest rate and that you aren’t required to make any payments for the first six months. But what you may miss in this “deal” is that if the entire balance of the loan isn’t paid off at the end of six months, you’ll owe all the interest you would have paid over that six-month period. Worse still, the lender could charge this back interest at whatever rate he likes. Any future missed payments could also trigger an even higher interest rate.

The caveat is that if you can get your loan balance paid off in full before the six months is up, you won’t have to pay any interest at all. Same as cash offers vary from creditor to creditor, so be sure you read the fine print on any offer you’re considering.

Are Same As Cash Offers a Good Idea?

In general, same as cash offers may not be the best option for consumers who have trouble making their payments. The only time they’re a decent option is if you are absolutely positive that you can pay off the full balance during the offer period. But you really never know what will happen to your finances over a 90-day or six-month period.

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What if your furnace breaks in the dead of winter, and a same as cash offer is literally your only option for getting it fixed? In this case, it’s better to take the chance than be unable to live in your home because of a furnace malfunction. But you’ll want to manage your risk by putting as much money toward paying off the balance each month as possible.

What Are Some Other Options?

When you’re in a situation where a same as cash offer is on the table, be sure you consider your other options first. These include saving up to pay cash and using credit cards or a personal loan instead.

Same as cash offers aren’t ideal for non-necessities, like furniture or vehicle upgrades. If you need a new couch, it’s best to just save up the cash you need to buy it. Or you can downgrade your expectations and buy a secondhand option from a site like Craigslist or Goodwill.

In the case of emergencies, though, you may not have the option to save up cash to cover the expense. In this case, using a credit card or personal loan may be a better option. (Note: If you consider applying for either of these, be sure you know where your credit stands, as this could impact the rate you receive. You can view two of your free credit scores, updated every 14 days, on Credit.com.) Yes, you’ll have to pay an interest charge each month while you pay off the debt. But you’ll likely secure a lower interest rate, and you won’t have to worry about taking a huge hit on interest all at once.

As with other financing options, same as cash has its place. But it’s definitely an offer you need to be cautious with and be sure to understand fully before you sign on the line.

Image: sergeyryzhov