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Difference between a Balance tranfer & a loan?

(21 Posts)
KatyMac Wed 15-Jun-11 22:12:29

My CC is offering 6.7% on the life of the balance transfer

How is this different to a loan?

JarethTheGoblinKing Wed 15-Jun-11 22:16:51

They're probably hoping that you'll continue to use the card and keep generating interest. IIRC CC debts pay off debts in the order it suits them (cheapest first) to generate the most cash.

On the other hand it won't have the same terms as a loan either (fixed term, early repayment charges etc, you can just pay the minimum each month, or pay more if you can.

KatyMac Wed 15-Jun-11 22:19:54

That's what I thought

I'm trying to work out if there is a catch

JarethTheGoblinKing Wed 15-Jun-11 22:26:11

Most likely it's that if you miss any payment at all you'll revert back to the extortionate default interest rate. Make sure that you pay the minimum payment over the phone for at least the first two months to make sure that the direct debit is established. I've been caught out with this one before where they've taken one payment, then blamed me for not setting up the DD correctly.

Might cost you double payments for a couple of months, but worth it tbh.

KatyMac Wed 15-Jun-11 22:26:37

It just seems ideal

I wonder if they will increase our limit as well; it could solve a lot of problems

KatyMac Wed 15-Jun-11 22:28:57

It's an account I already have a DD set up for (that's lucky)

JarethTheGoblinKing Wed 15-Jun-11 22:36:48

Do you have the option to transfer any of it to an interest free card?

I got a good deal with a Tesco credit card, 0% interest for over a year, and points as well.

It does seem ideal though, but just cut the card up and treat it like a loan.

KatyMac Wed 15-Jun-11 22:39:40

I kind of have 3 atm running out Sept, Oct & Nov

I can't pay them off by them so I need to bump them

This seemed like a way to take control

Maybe?

OK I pay interest but it's all in one place I can over/under pay as necessary

Or I could wait & see what's around in Sept?

JarethTheGoblinKing Wed 15-Jun-11 22:43:13

well, you can always transfer everything to this credit card and then if you do manage to get an interest free card you can transfer some of the balance. Win win grin

KatyMac Wed 15-Jun-11 22:45:40

I like that idea - I know I lose 4 months or so interest free but I gain peace of mind (I think)

CogitoErgoSometimes Wed 15-Jun-11 23:12:54

I think, if you've got 3 credit cards on the go, and come Sept-Nov you're going to struggle to meet the payments, it may be a good idea to seek debt advice from one of the free services like CAB, CCCS or National Debtline.

JarethTheGoblinKing Wed 15-Jun-11 23:45:46

I think consolidating the debts into one place makes a LOT of sense. It's what CAB would advise. One thing though, when I've had a card like this in the past, they've upped the percentage of the balance that I've had to pay. Make sure that the monthly payment doesn't suddenly jump as a result of this deal with them.. when I had it I couldn't meet it and ended up using the card to buy essentials, and then they would charge me horrific interest on that amount.

MUCH better to have it all in one place, as long as you know the monthly amount, and how long it will take you to pay off.

Just be careful.. I've done it a few times (loan to pay off cards.. first one was 7k, the one I'm currently paying off it 18k and it's about a year from completion). We also have credit cards amounting to around £5k. We're paying them off, we're getting there, and I'm abusing all the interest-free rates that we possibly can to do it, but it's a bloody slog. Don't let it get to this point.

p.s. how's your DD?

KatyMac Thu 16-Jun-11 07:31:22

CogitoErgoSometimes I'd be able to pay them but I'd rather bounce them to another interest free to reduce paying interest; I spoke to the National debt people & they said it's a "cash flow situation" rather than 'debt' (which tbh I didn't understand). This appeals as it is 6.7% rather than normal CC rates

JarethTheGoblinKing - DD is pretty good, no sign of the problem at all!! That's it isn't it debt consolidation is 'good' (well at least in my book). This card isn't one I use; I have a tesco's card I use like a current account, you pay off the whole balance at the end of the month. I'm trying to get straight so I can organise a new kitchen next year <sigh>

But I am being careful I don't get 'stung'

KatyMac Thu 16-Jun-11 10:32:43

Nah they can't do it

Which is a shame but not disastrous

CogitoErgoSometimes Fri 17-Jun-11 10:02:41

A 'cash flow situation' means that you are robbing Peter to pay Paul. i.e You're in debt because you owe far more money in total than you can pay off in one hit but you can just about keep on top of the debt payments if you juggle things around and rate-tart it a bit with the cards etc.

KatyMac Fri 17-Jun-11 10:28:55

Exactly

I will pay it off; I have twice before (holiday of a lifetime/business nearly went under) both paid off in about 18 m. But last year we had an awful time with DD's health and I worked less so it had a knock on effect

I panicked and did another 0% (for 12 m) but I will pay off the one with the lifetime balance offer then use that as well (I think)

CogitoErgoSometimes Fri 17-Jun-11 10:40:44

Trouble with the 'cashflow situation' is that it leaves you very exposed to interest rate rises. What starts out as just about manageable quickly becomes a problem if all your lenders bump up their rates. If you can pay it all off at once and reduce it to a fixed payment at a fixed level of interest, then it might be a good idea just so long as you don't add to the debts in the meantime.

KatyMac Fri 17-Jun-11 11:13:41

Oh no added debt

It's just carried over; I will sort it out <promise. wink

xiaojree Sat 18-Jun-11 13:28:46

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xiaojdd Sun 19-Jun-11 01:30:03

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xiaojwww Mon 20-Jun-11 02:49:28

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