Read the small print

A bank advertised two loans as follows:

a) Fixed repayment. Low interest rate of 7.5% p.a.
b) Flexible repayment. Low fund transfer rate of 0.3% per month for 6 months.

30% cash back on the interest charges for one year.

The small print at the bottom of the advertisement says:

a) The effective interest rate are 13.8% p.a. for 2 years, 13.69% p.a. for 3 years, etc
b) The effective interest rate is 10.05% for the first year. The prevailing interest rate of 16.5% p.a. applies thereafter.

Do not be misled by the lower interest rate that was advertised. Look for the effective interest rate. Are you prepared to pay an annual interest rate of about 13% on the loan?

Lesson: You should save now and spend later. If you lend to yourself (i.e. from your past savings), you can earn a yield of 13% p.a. (i.e. the interest rate that you have to pay on a loan).