Paying off a Loan with a Credit card.....
Discussion
Hi chaps.
Just wondering what the viability of this is. Here's my situation.
I took out a loan 2 years ago with payments of around £300 a month. The APR is 7.9%.
Right at this moment in time I need to cut down on my payments, as I have just moved into a very nice (but expensive house)
Speaking to the loan company, they will refinance me, but at a much higher rate. I can instead pay the balance off altogether.
My thinking is that I could pay the balance off with my Lloyds credit card (19.9% APR) and then immediately transfer to my Barclaycard (who will give me 6.9% APR on the balance until paid off and charge me a small transfer fee.
This will immediately give me a lot more breathing space, and still give me a low rate on the balance until paid off, with more flexibility.
Thoughts? Good idea or not?
Just wondering what the viability of this is. Here's my situation.
I took out a loan 2 years ago with payments of around £300 a month. The APR is 7.9%.
Right at this moment in time I need to cut down on my payments, as I have just moved into a very nice (but expensive house)
Speaking to the loan company, they will refinance me, but at a much higher rate. I can instead pay the balance off altogether.
My thinking is that I could pay the balance off with my Lloyds credit card (19.9% APR) and then immediately transfer to my Barclaycard (who will give me 6.9% APR on the balance until paid off and charge me a small transfer fee.
This will immediately give me a lot more breathing space, and still give me a low rate on the balance until paid off, with more flexibility.
Thoughts? Good idea or not?
Why not take out a credit card offering 0% interest free for 12 months on balance transfers - most will also allow this to include cash transfers to your current account.
So take out card - transfer max balance to current account (usually with min 3% handling fee) pay loan off with cash and then pay monthy amounts off interest free creduit card.
Once interest free period comes to an end in say 12 / 15 months take another interest free card out and w
e it accross to them.
Virgin / Capital One / MBNA all usually have decent length 0% periods availabel on them.
I've done this. I know it works.
So take out card - transfer max balance to current account (usually with min 3% handling fee) pay loan off with cash and then pay monthy amounts off interest free creduit card.
Once interest free period comes to an end in say 12 / 15 months take another interest free card out and w
e it accross to them. Virgin / Capital One / MBNA all usually have decent length 0% periods availabel on them.
I've done this. I know it works.
Dan_1981 said:
Why not take out a credit card offering 0% interest free for 12 months on balance transfers - most will also allow this to include cash transfers to your current account.
So take out card - transfer max balance to current account (usually with min 3% handling fee) pay loan off with cash and then pay monthy amounts off interest free creduit card.
Once interest free period comes to an end in say 12 / 15 months take another interest free card out and we it accross to them.
Virgin / Capital One / MBNA all usually have decent length 0% periods availabel on them.
I've done this. I know it works.
Can you transfer a blance off a credit card to a bank account? I was always under the impression this was a cash withdrawal and herefore costs a fortune!So take out card - transfer max balance to current account (usually with min 3% handling fee) pay loan off with cash and then pay monthy amounts off interest free creduit card.
Once interest free period comes to an end in say 12 / 15 months take another interest free card out and w
e it accross to them. Virgin / Capital One / MBNA all usually have decent length 0% periods availabel on them.
I've done this. I know it works.
Haighermeister said:
Dan_1981 said:
Why not take out a credit card offering 0% interest free for 12 months on balance transfers - most will also allow this to include cash transfers to your current account.
So take out card - transfer max balance to current account (usually with min 3% handling fee) pay loan off with cash and then pay monthy amounts off interest free creduit card.
Once interest free period comes to an end in say 12 / 15 months take another interest free card out and we it accross to them.
Virgin / Capital One / MBNA all usually have decent length 0% periods availabel on them.
I've done this. I know it works.
Can you transfer a blance off a credit card to a bank account? I was always under the impression this was a cash withdrawal and herefore costs a fortune!So take out card - transfer max balance to current account (usually with min 3% handling fee) pay loan off with cash and then pay monthy amounts off interest free creduit card.
Once interest free period comes to an end in say 12 / 15 months take another interest free card out and w
e it accross to them. Virgin / Capital One / MBNA all usually have decent length 0% periods availabel on them.
I've done this. I know it works.
The risk is that you fall into the trap of paying off only the interest + minimum payment. In order to ensure you paid the card off in the same time frame as the loan, you'd still need to be paying off an amount not much less than the £300 a month you're paying now.
Bear in mind that BTRs are not usually long-term and a card company can pull a bait-and-switch on you with higher interest rates kicking in further down the line - at which point you may not have the option of doing a BT to another card as it's another thing the card company can enable/disable at a whim.
I'd be wary of paying off a loan with a card - your loan is a known, fixed quantity but a card's terms can be varied by the card company.
Bear in mind that BTRs are not usually long-term and a card company can pull a bait-and-switch on you with higher interest rates kicking in further down the line - at which point you may not have the option of doing a BT to another card as it's another thing the card company can enable/disable at a whim.
I'd be wary of paying off a loan with a card - your loan is a known, fixed quantity but a card's terms can be varied by the card company.
Funk said:
The risk is that you fall into the trap of paying off only the interest + minimum payment. In order to ensure you paid the card off in the same time frame as the loan, you'd still need to be paying off an amount not much less than the £300 a month you're paying now.
Bear in mind that BTRs are not usually long-term and a card company can pull a bait-and-switch on you with higher interest rates kicking in further down the line - at which point you may not have the option of doing a BT to another card as it's another thing the card company can enable/disable at a whim.
I'd be wary of paying off a loan with a card - your loan is a known, fixed quantity but a card's terms can be varied by the card company.
I see. Barclaycard assured me that the rate on a transferred balance will always stay at 6.9% until that is paid off, but any payments to my card will come off that first.Bear in mind that BTRs are not usually long-term and a card company can pull a bait-and-switch on you with higher interest rates kicking in further down the line - at which point you may not have the option of doing a BT to another card as it's another thing the card company can enable/disable at a whim.
I'd be wary of paying off a loan with a card - your loan is a known, fixed quantity but a card's terms can be varied by the card company.
I don't like the idea of 0% for X months because of the exact reasons you have stated. Whereas with a fixed 6.9% surely I am ok?
My plan is to continue paying off at £300pm but with the flexibility to pay off £50 in one month should I need it. Obviously I'm aware that this would extend the term essentially, but that's not an issue. I am also in the process of breaking a car, which will be bringing money in slowly and in small amounts which I will pay straight off the credit card balance without penalties, whereas with the loan, I can pay only the full amount off which means keeping hold of the cash, which causes temptation to spend :P
Haighermeister said:
I see. Barclaycard assured me that the rate on a transferred balance will always stay at 6.9% until that is paid off, but any payments to my card will come off that first.
I don't like the idea of 0% for X months because of the exact reasons you have stated. Whereas with a fixed 6.9% surely I am ok?
My plan is to continue paying off at £300pm but with the flexibility to pay off £50 in one month should I need it. Obviously I'm aware that this would extend the term essentially, but that's not an issue. I am also in the process of breaking a car, which will be bringing money in slowly and in small amounts which I will pay straight off the credit card balance without penalties, whereas with the loan, I can pay only the full amount off which means keeping hold of the cash, which causes temptation to spend :P
I had 4.9% life-of-balance on two different cards, both of which have recently been increased to 7.95% and 9.95% by the card companies; I'd be gobsmacked if Barclaycard haven't got some kind of clause in their Ts & Cs that allow them to do the same in future if they wanted to.I don't like the idea of 0% for X months because of the exact reasons you have stated. Whereas with a fixed 6.9% surely I am ok?
My plan is to continue paying off at £300pm but with the flexibility to pay off £50 in one month should I need it. Obviously I'm aware that this would extend the term essentially, but that's not an issue. I am also in the process of breaking a car, which will be bringing money in slowly and in small amounts which I will pay straight off the credit card balance without penalties, whereas with the loan, I can pay only the full amount off which means keeping hold of the cash, which causes temptation to spend :P
Thanks Funk 
Just checking out the MBNA card which will do a money transfer to allow me to pay off the loan @ 5.9% with a 1.5% handling fee. Seems like the more appropriate idea really. https://wwwa.mbna.co.uk/apply/UKCCapp/Ctl/entry?sc...
Think I'll pop an application in and get one sorted anyway.
Just checking out the MBNA card which will do a money transfer to allow me to pay off the loan @ 5.9% with a 1.5% handling fee. Seems like the more appropriate idea really. https://wwwa.mbna.co.uk/apply/UKCCapp/Ctl/entry?sc...
Think I'll pop an application in and get one sorted anyway.
Worth bearing in mind that with any promotional rate on a card (such as MBNA's [who, by the way, are - in my opinion - the worst of the bunch bar Capital One]) will be null and void should you miss a single payment, whether intentionally or a DD issue. You'll be dumped on their standard rate (which is around 22% for MBNA at the moment I think).
I would be very, very reticent about moving a loan to a credit card, I really would.
I would be very, very reticent about moving a loan to a credit card, I really would.
BrabusMog said:
Do you mind giving us the info of how much you have left on the loan, what your rate is now and what it would be if you changed the payment terms? I've had some good financial advise here in the past, someone may be able to help you out.
Loan is £4000 left, paying just under £300 a month, apr is 7.9% but if I refinance, they have proposed 24.9%.
They say if I borrow more, I'll get a better rate, but I don't want anymore.
Haighermeister said:
Loan is £4000 left, paying just under £300 a month, apr is 7.9% but if I refinance, they have proposed 24.9%.
They say if I borrow more, I'll get a better rate, but I don't want anymore.
I can see why you are thinking about going down the CC route then. They say if I borrow more, I'll get a better rate, but I don't want anymore.
Tough one, like Funk I'd be wary of loading it on to a CC but I guess if you think it will work out then go for it. As Funk says, make sure you get the bill paid on time every time so you don't get whacked on to a ridiculous rate.
As long as you're confident you'll be able to make the minimum payment goign forward I don't see the issue with moving to an interest free card.
Looking at http://www.money.co.uk/credit-cards.htm
Natwest, Barclay Card, MBNA and Natwest all offer between 18 months & 20 months interest free on balance / money transfers.
Even if you reduce your monthly payment to either 200 or 250 you'll have repaid the loan before the interest free period runs out.
Its just a case of knowing if you're going to be disciplined enough to do that or not?
Worst case scenario is that you don't manage to pay it off in 18 months and you have to move it to another 0% card.
Yes its a risk but its going to save you a good bit of cash.
Looking at http://www.money.co.uk/credit-cards.htm
Natwest, Barclay Card, MBNA and Natwest all offer between 18 months & 20 months interest free on balance / money transfers.
Even if you reduce your monthly payment to either 200 or 250 you'll have repaid the loan before the interest free period runs out.
Its just a case of knowing if you're going to be disciplined enough to do that or not?
Worst case scenario is that you don't manage to pay it off in 18 months and you have to move it to another 0% card.
Yes its a risk but its going to save you a good bit of cash.
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