12 Months No Interest Ends Soon? Avoid Retroactive Interest with Home Equity

Promotional financing can be a great way to fund a major purchase without immediate interest charges. But there’s a catch that catches many people off guard: what happens when the promotional period ends.

If you’ve financed a home improvement project, furniture purchase, or other major expense with a “12 months no interest” or similar promotional loan, it’s worth understanding exactly what’s coming, and what options you have.

How Promotional Financing Actually Works

Most promotional financing offers follow a similar structure. You make purchases or fund a project with no interest charges for a set period—typically 6, 12, or 18 months. During this time, you might make minimum payments, or in some cases, no payments at all.

Here’s where it gets tricky. These aren’t typically “interest-free” loans. They’re “deferred interest” arrangements. The interest is calculated from day one, but it’s only applied to your balance if you don’t pay off the full amount before the promotional period ends.

Miss that deadline by even a day, and all the accumulated interest from the entire promotional period gets added to your balance at once. On a $30,000 loan at 24% APR, that could mean $7,200 in retroactive interest hitting your account overnight.

The Payment Shock

Beyond the retroactive interest, your regular interest rate kicks in—often somewhere between 20-29% APR. Your monthly payment can jump dramatically.

Let’s say you financed a $50,000 kitchen renovation on a 12-month promotional offer. If you haven’t paid it off when the promo ends:

• Retroactive interest charges (at 24% APR): roughly $6,000-$8,000 added to your balance
• New monthly payment: $1,100+ (vs. the minimal payment during the promo period)
• Interest rate: 24% APR going forward

That’s a significant financial shift that can strain most household budgets.

Using Home Equity as an Alternative

If you have equity in your home, a HELOC offers a different approach. Instead of waiting for the promotional period to end and facing retroactive interest, you can pay off the promotional loan before it converts to high-interest debt.

Here’s how the math typically works out:

Keeping the Promotional Loan:

• Interest rate after promo: 20-29% APR
• Retroactive interest (on $50k balance): $6,000-$8,000 applied instantly
• Monthly payment: $1,100+
• Payment structure: Fixed, required payment

Switching to a HELOC:

• Interest rate: Currently averaging 6 to 14% APR (variable)
• Retroactive interest: $0 (you pay off the loan immediately)
• Monthly payment: As low as 1% of balance (~$500 on $50k)
• Payment structure: Flexible - pay more when you can, minimum when you need to

The rate difference alone can save hundreds per month in interest charges.

When This Strategy Makes Sense

A HELOC works particularly well if:

• Your promotional period is ending within the next few months
• You have significant equity in your home (typically need 15-20% equity remaining after the HELOC)
• You want payment flexibility rather than a fixed monthly obligation
• You’re strategic about paying down debt over time

It’s less ideal if you’re close to paying off the balance anyway, or if you don’t have substantial home equity to work with.

Understanding HELOC Flexibility

One advantage of a HELOC is that it’s revolving credit, similar to a credit card but secured by your home. Once you pay off the promotional loan, you have that credit line available for future needs during the draw period (often 10-25 years).

With the Trovy HELOC specifically, you can access funds via a card for everyday purchases or request cash advances for larger expenses. You only pay interest on what you actually use, and you can convert balances to fixed rates if you want predictable payments on specific amounts.

There are no origination fees, application fees, or annual fees—just a draw fee of up to 3% on cash advances (no fee when using the Trovy Card).

Tax Considerations

Another potential benefit: HELOC interest may be tax-deductible if the funds are used for home improvements. This doesn’t apply to promotional loan interest.

For example, if you used that 0% financing to renovate your kitchen, paying it off with a HELOC and using those funds for home improvements could make the interest tax-deductible. You’ll want to consult with a tax advisor about your specific situation.

Acting Before the Deadline

The key with promotional financing is timing. Once the promotional period ends and retroactive interest is applied, that money is gone. But if you pay off the balance before the deadline, you avoid those charges entirely.

Most people start exploring their options 2-3 months before their promotional period ends. This gives enough time to:

• Check your home equity and see what you qualify for
• Get approved for a HELOC
• Close and access funds
• Pay off the promotional loan before the deadline

The Trovy HELOC process is relatively quick—you can check your rate in minutes, get approved the same day, and typically access funds within a few days of closing.

The Bottom Line

Promotional financing serves a purpose, but it’s designed to convert to high-rate debt if you don’t pay it off in time. If you have home equity and your promotional period is ending soon, a HELOC offers a way to avoid retroactive interest charges while locking in a significantly lower ongoing rate.

The payment flexibility alone can make a substantial difference in your monthly budget, and the potential tax benefits add another layer of value for home improvement expenses.

If you’re facing an expiring promotional period, it’s worth running the numbers to see what a HELOC could save you.