You can now split the cost of buying something new over three months with Spreddit. And there is no interest to pay. What's the catch?
If you could buy a new laptop, pay a third of the price up front, and the rest at a later date for no extra charge, would you?
The website Spreddit is offering exactly this on high-end fashion and technology items. And there seem to be no hidden catches.
But is it a viable way to spread the cost of buying something new, or simply another way to persuade people to part with their money?
Interest-free shopping
Buying something and paying for it at a later date is generally something to avoid, as retailers typically whack on huge interest charges when you come to make the payment.
But although Spreddit sounds too good to be true, it seems to do what it says on the tin. There is no interest and the payment for a new item is simply split into three instalments, paid back over three months.
Spreddit pays the retailer upfront for an item and then the customer pays it back. It doesn’t charge interest because it makes its money from the retailers included on the site, as opposed to other buy now pay later companies, such as Littlewoods and Very.
The prices haven’t been increased either and all the items I checked were exactly the same price as on the official retailer’s websites.
However, it's worth double checking these prices as some can be found cheaper on other websites. For example, there is currently a Macbook Air for sale which is listed on the website for £949, but is available at Amazon for £863.97.
It has only been live since August, so at the moment the items on offer are limited; it's mainly men's and women's clothes. As it expands other areas will be added, such as travel and entertainment.
Examples of current items listed include an iPhone 5 with an accessory pack for £650 which would be paid for in three instalments of £218.01.
The fashion pages consist of high-end designers such as a women’s leather Pashli satchel for £805 (three payments of £268.34) and a men’s Colpel hooded jacket for £165, or three payments of £57.
What’s the risk?
To the customer there is very little risk. When you’ve bought something you have the same rights as you would buying direct from the retailer. Refunds and returns are dealt with through Spreddit.
[SPOTLIGHT]If you decide you want to pay off the balance of an item early, you can and won't be charged a penalty.
But if you miss a payment there will be a penalty. Chief Executive Officer, Jae Shin, said outstanding debt may be broken down into smaller chunks.
However, failing this the customer will be charged a £15 fine and the account will be shut down immediately, which may negatively affect the customer’s credit score.
To check your credit score, you can get a free trial with Credit Expert through Lovemoney.
The pros and cons
For those people who can afford to buy the designer goods on offer, Spreddit offers a little more flexibility when making the payments.
Shin says the site is an antidote to aggressive lenders like Wonga, which launched a Pay Later service last year set at a high rate of interest.
“We would like to differentiate ourselves from these existing providers, to offer a completely free, transparent service for consumers,” she said.
However, one downside to the website is that it encourages people to spend more. As you do not have to pay out the full price straight away it’s tempting to sign up and worry about the costs at a later date.
But for those people who are aware of the costs involved and who can afford the three monthly payments, it’s an interesting idea. The real test will be once the site develops and has a bigger range of products for sale
The alternatives
If you’re looking for a way to split the cost of something, there are several retailers around which offer 0% interest payment options. But these generally incur a hefty interest rate after a certain fixed period as our article The danger of ‘buy now, pay later’ shopping explains.
Another option is to use a 0% purchase credit card. These offer up to 18-month 0% periods and will allow you plenty of breathing space to pay off the loan without paying any interest.
Top of the list in this range is the Tesco Clubcard Credit Card which has an 18-month 0% period. This is followed by the Halifax Purchase Credit Card with a slightly lower 17-month 0% period.
There are no restrictions on what you buy with one of these cards, and you've got a lengthy period to pay back the money. However, when the 0% period does end interest payments will kick in.
Read The best 0% purchase credit cards.