FIGHT BACK : `NO PAYMENTS, NO INTEREST' IS `NO PROBLEM' (IF YOU'RE CAREFUL).

Byline: David Horowitz 

You see these offers all the time on big-ticket purchases such as air conditioners, computers, kitchen appliances and furniture. ``No interest, no payments for six months'' or a year, sometimes even longer. You get the goods now, and the bill won't come due until later. Is this really an interest-free loan? It can be if you understand exactly what you're getting into.

Here's the deal. To get the merchandise, you fill out a loan or credit application in which you agree to pay your purchase in full or begin making payments on a certain future date. If you do pay it off in full on or before that date, then yes, you do get an interest-free loan. But if you decide to make payments instead, you get hit with a huge amount of interest, sometimes as high as 24 percent a year.

What many buyers don't understand is the fine print that talks about accrued interest. What that means is that interest actually begins to accrue on the date you made the purchase, not the date the payments begin. Under the loan agreement, if you pay off the purchase price by the due date, that interest is waived and the loan is canceled. But if you pay anything less than the full amount by that date, then all that back interest is added to your loan. It doesn't matter if you make partial payments before the due date. Unless that loan is paid off entirely by then, you will owe all that accrued interest.

This can be a very good deal if you have some way to pay off that loan by the due date. If you know, for example, that you will be receiving a bonus or tax refund before the loan is due, then you can set that money aside, pay off the loan on time and avoid all interest payments. Or if you have the money already, leave it in the bank and collect the interest until the loan comes due.

If you're planning to make payments, however, you're better off rolling that loan over to a credit card. Most deferred-interest loans don't allow you to simply present a credit card as payment. But if your credit-card company also issues checks, then you can use one of those to pay off your purchase, and then make your payments to your credit-card account. Yes, credit-card interest rates are high, usually around 18 percent. But that's better than the 20 percent to 24 percent you'd pay on the deferred interest loan.

How can retailers afford to offer interest-free terms on major purchases? In the first place, most of them don't carry their own loans. They turn it over to a finance company, which pays for the purchase and then waits for you to pay it off, either totally or in installments. The finance company makes no profit on those who pay off their loans by the due date. But they more than make up for that with the interest they collect from those who wait and then make payments. That's about half their accounts on the average.

Besides interest on the loan, the finance company usually receives a small percentage of the purchase from the retailer. The company also gets your name, address and credit history to use for mailing lists and future loan solicitations.

If you take advantage of a deferred-interest offer, don't be surprised if you get what looks like a bill from the finance company a month or so later. This isn't really a bill. It's actually a reminder of when the payoff is due and how much interest is accruing in the meantime. Keep that handy because that's a deadline you don't want to miss.

MEMO: David Horowitz's column appears on Saturdays.