 TITLE: What Is a No-Interest Loan? CONTENT: How Does a No-Interest Loan Work?\n---------------------------------\nMost loans require you to pay back the principal amount plus interest, which is essentially the cost of borrowing money. A no-interest loan, however, allows you to skip the interest charges and solely repay the principal amount. At first glance, this may seem like the ultimate deal. The reality, however, is that certain types of no-interest loans charge deferred interest if you don't follow the loan terms exactly, and that could cost you.\nDeferred interest is a delay in interest charges for a set time period. If you pay off your loan balance in full by the end of the no-interest term, you won't pay any interest, deferred or otherwise. In the event you fail to pay off the loan by then, however, you could be on the hook for the retroactive interest charges going back to the day you took out the loan.\nHere's how it works.\nLet's say you buy $5,000 worth of appliances with a zero-interest loan from the retailer. You have plans to pay it off in full before the time period is up—but you unexpectedly lose your job and don't pay the last $1,000 before the no-interest period ends.\nIn this case, you'll likely have to pay interest on the entire $5,000 loan, not just the remaining $1,000 balance. And if the standard interest rate is high, your purchase will likely cost you more than it would have if you'd taken out a traditional loan with interest. END