Paying off Finance on a Credit Card; Possible?
Discussion
I know this sounds odd but please bear with me.
I have a car on a PCP agreement which I took out this time last year. Circumstances have changed drastically; when I bought it all was well with my other half, and the job I had meant that I was better off with my own car on a PCP deal than getting a company car as you sacrificed a chunk of salary AND got taxed on it (not sure how they got away with that!). Since then, the relationship went down the pan, so I'm now living on my own. My new job has a company car available to me, which I initially didn't take because of my own car, but I've been weighing up the options on going for it and getting shot of my car.
Here lies the problem. I'm in £5000 of negative equity (before anyone asks, it's a Jeep Renegade) so simply selling the car and using the money to pay off the finance company isn't quite going to cut it. My original thought, which is looking most likely right now, is take out a bank loan for the £5k (most banks will do this at 4.9%) which will save me £200 per month. A colleague reminded me though that on £7.5k loans the rate drops quite significantly, and suggested taking the £7.5k, then after a month or so pay £2500 off, if this can be done then bonus, £5k at an even lower rate!
My dad mentioned 0% credit cards. In theory this sounds great, as it would greatly reduce my outgoing and could be paid off in less than 2 years, but would a finance company accept a credit card payment? Would like to know what PH thinks of this.
I have a car on a PCP agreement which I took out this time last year. Circumstances have changed drastically; when I bought it all was well with my other half, and the job I had meant that I was better off with my own car on a PCP deal than getting a company car as you sacrificed a chunk of salary AND got taxed on it (not sure how they got away with that!). Since then, the relationship went down the pan, so I'm now living on my own. My new job has a company car available to me, which I initially didn't take because of my own car, but I've been weighing up the options on going for it and getting shot of my car.
Here lies the problem. I'm in £5000 of negative equity (before anyone asks, it's a Jeep Renegade) so simply selling the car and using the money to pay off the finance company isn't quite going to cut it. My original thought, which is looking most likely right now, is take out a bank loan for the £5k (most banks will do this at 4.9%) which will save me £200 per month. A colleague reminded me though that on £7.5k loans the rate drops quite significantly, and suggested taking the £7.5k, then after a month or so pay £2500 off, if this can be done then bonus, £5k at an even lower rate!
My dad mentioned 0% credit cards. In theory this sounds great, as it would greatly reduce my outgoing and could be paid off in less than 2 years, but would a finance company accept a credit card payment? Would like to know what PH thinks of this.
Matthen said:
LuS1fer said:
I don't know but i once tried to buy a £3000 car on a 0% card at a dealer and they wanted to charge me 5% as that is what the card company charged them.
Same, i'm lead to believe its pretty common. Hold on a second - the current situation can continue can it not? Cash4car instead of company car - given the £5k you flag as outstanding on most cash4csr payments you should clear that between 12-24months depending on how much they pay you.
You can of course look into the cheapest way to finance it while you are at it too.
You can of course look into the cheapest way to finance it while you are at it too.
hoegaardenruls said:
Also bear in mind that bank loans usually have the interest amount preloaded, i.e. you agree to pay back loan amount plus interest, and overpaying may not save you anything.
Not true.See the Consumer Credit (Early Settlement) Regulations 2004.
http://www.legislation.gov.uk/uksi/2004/1483/regul...
AWRacing said:
I didnt think you could pay off a loan using a credit card given you'd be paying off credit with credit.
Nothing wrong with that if you've got the credit limit to do so. I'm sure my credit card company would be happier if I spent the money transferring existing debt to them (so they get a bigger piece of a smaller pie) than buying yet another flight.Of course the loan company might not fancy paying the fee for taking the credit card, but the issue isn't with the source of the funds as much as it is with the cost of processing the payment.
Welshbeef said:
Hold on a second - the current situation can continue can it not? Cash4car instead of company car - given the £5k you flag as outstanding on most cash4csr payments you should clear that between 12-24months depending on how much they pay you.
You can of course look into the cheapest way to finance it while you are at it too.
Not really, I owe £19k on the Jeep, which I could realistically sell for £14-15k. With my new job, there is no salary sacrifice for a company car and I'd only pay CC tax, which would be about £50 per month (it'd be a 208 as I work for Peugeot). Whereas at my last job, I lost £200 per month just for having a company car, then paid another £50 per month for private use insurance, and then company car tax on top, which meant I was paying £380 odd for a pretty basic Kia. My Jeep is £350 per month, and at the time this worked out perfectly as the now ex Mrs DanB was sharing the Jeep and contributing towards it.You can of course look into the cheapest way to finance it while you are at it too.
I've had a look at personal loans online, and Santander comes in at £149 per month over 3 years borrowing £5k. I'd still be paying for the same amount of time as my finance agreement (I'm 1 year into a 4 year PCP), but without the £9k GFV to pay off at the end, plus I'd be saving £200 a month over my current situation.
If I was to take a 0% credit card, and paid £200 per month back, it'd be clear in 2 years, if it was OK to pay the negative equity off on a credit card. Plus, if my sister's advice is correct, then I could potentially get a decent mortgage (according to her mortgage advisor, any loans under £10k aren't taken into consideration when applying, whereas the situation with my Jeep means I can get a mortgage for £20k rather than the £100k I could potentially get without it (and would need for the house I'm eyeing up). I know taking on more credit isn't the greatest idea, but at the moment it seems to be the best of a bad situation. The only other way to get out of it would involve the Jeep being written off, and claiming on the GAP insurance, which would actually leave me with an extra £2k in my pocket. I have learnt my lesson though; never buy a brand new Jeep!
My understanding is that paying off a loan like this is effectively cash-for-cash, IYSWIM.
That's why BMW Finance won't take the charge - there is essentially ZERO margin to share with the "retailer" - obviously in this case there is no retailer - just the debt holder, who wants 100% CASH since that's what they have sitting on their books.
As a result - you can't take advantage of the 0% finance offers on the CC because they don't usually let you apply that for CASH advances (which is what you need to cover the loan).
On top of that they will charge you 2.5%, or whatever, just to advance the cash in the first place.
Think about it like this:
When a retailer sells you a holiday or something they can't very easily get cash payments, it's infinitely easier to take a card.
PLUS they have that lovely 50% gross margin or so to play with. That means they can swallow the 1.25% interchange fee (it's nowhere near 5%, that's just a dealer ripping people off as usual), either by taking a tiny hit to their margin or more likely assuming they will be paid with a card and building that into the price they charge.
For loans it's completely different.
The margin is absolutely tiny. If they offer you a 5% rate or something then they aren't going to take 25% of their profit away by absorbing the 1.25% interchange fee. (1.25/5=25%)
Likewise on the cash advances - the card issuer doesn't get that 1.25% fee when they give you CASH.
What I don't know is whether you might be able to take out a £5k cash advance on one card (any card) and then transfer THAT balance to a 0% transfer card.
That's why BMW Finance won't take the charge - there is essentially ZERO margin to share with the "retailer" - obviously in this case there is no retailer - just the debt holder, who wants 100% CASH since that's what they have sitting on their books.
As a result - you can't take advantage of the 0% finance offers on the CC because they don't usually let you apply that for CASH advances (which is what you need to cover the loan).
On top of that they will charge you 2.5%, or whatever, just to advance the cash in the first place.
Think about it like this:
When a retailer sells you a holiday or something they can't very easily get cash payments, it's infinitely easier to take a card.
PLUS they have that lovely 50% gross margin or so to play with. That means they can swallow the 1.25% interchange fee (it's nowhere near 5%, that's just a dealer ripping people off as usual), either by taking a tiny hit to their margin or more likely assuming they will be paid with a card and building that into the price they charge.
For loans it's completely different.
The margin is absolutely tiny. If they offer you a 5% rate or something then they aren't going to take 25% of their profit away by absorbing the 1.25% interchange fee. (1.25/5=25%)
Likewise on the cash advances - the card issuer doesn't get that 1.25% fee when they give you CASH.
What I don't know is whether you might be able to take out a £5k cash advance on one card (any card) and then transfer THAT balance to a 0% transfer card.
With a PCP deal can't you hand the car back and walk away even if its worth less than the current fiance after the 18 month period? Obviously it needs to be within the mileage allowance and in good condition.
How far are you off from the 18 month period? Can you suck up the payments till then?
How far are you off from the 18 month period? Can you suck up the payments till then?
kiethton said:
23rdian said:
Virgin Money are currently peddling 32 month money transfer for 1.69% some reports of big limits. Worth a go.
Yep, got a virgin card myself a few months back - 0.59% balance transfer fee and they gave me a £15k limit when I asked for £10k..Zoon said:
kiethton said:
23rdian said:
Virgin Money are currently peddling 32 month money transfer for 1.69% some reports of big limits. Worth a go.
Yep, got a virgin card myself a few months back - 0.59% balance transfer fee and they gave me a £15k limit when I asked for £10k..Yes, it is possible depending on the finance provider. I had a Volvo on PCP with Santander and they accepted a credit card as final payment.
I can't remember whether or not there was a fee, but had there been one I assume I had worked out that he fee was less than the interest to be charged over the remainder of the term and that it made sense to use the 0% card at that time.
I can't remember whether or not there was a fee, but had there been one I assume I had worked out that he fee was less than the interest to be charged over the remainder of the term and that it made sense to use the 0% card at that time.
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