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Have you transferred a loan to an interest free credit card? Did it work out Ok?(9 Posts)
Hi, I did this with my career development loan when I left uni. I was able to transfer half of my loan to a zero pc for the life of the balance card and my mum kindly took another card out for the remainder of the balance. I was very strict at paying off of each every month and only had ro spend a minimum if a pound on the card each month to jeep it valid. I managed to pay the balance off in about 3 years paying very little interest. I know that they changed the t&cs of subsequent cards that bank brought out so I was lucky to be able to do it with little hassle but discipline.
Ring your bank and ask, then set up direct debits like you say, you will most likely be charged a fee normally a percentage of the debt 3-4%.
Depending on your earnings I would say the biggest stumbling block will be how higher credit limit they are willing to offer on the card. However as the fee is a percentage there is no more cost in having more than one card, so if they say yes but only £4000 you could apply for another card with someone else for the remainder of the money (check money saving expert for the longest running 0% deals). You may also split the debt between you and your partner having a card each.
I have been doing this for my other half (debts from university) for several years and now we are almost paid off, the bonus of having more than one card is that once you transfer the balance they normally worry that they've lost your business and after a few months start offering you deals again. You can use these deals when you run out of interest free on the other card.
Obviously you need decent earnings and a good credit rating to be given the card in the first place.
I agree that it can be complex and you need to be on the ball to juggle the debts and avoid paying interest but it is possible. I do however work in finance doing this sort of thing for a large company so if your not confident that you can mange it leave well alone.
The big risk is that your boiler blows up / car fail its MOT / commuting costs go up / you have an awful few months and really really need a holiday. So you decide "just this once" not to pay the £367. And then in 28 months you still have a big debt and are now paying 22% on it.
If you are convinced you won't do this then it sounds a good idea.
I guess it wouldn't hurt to ask my current loan provider (which is also my normal bank) who have offered the credit card deal, whether they are happy for me to transfer the loan onto the credit card. At least that way they still keep my debt!! Worst case scenario, they say no and I'm no worse off than I am now!
Thank you all.
MBNA are doing 29 months 0% and you can do a money transfer into a bank account with it. So you could effectively transfer the 8k into your bank account and then transfer to loan.
That is if you get that much of a high credit limit though initially.
Have you seen a credit Card that offers such s high balance? I ask as we're in a similar situation and would be great to shift loan so we can pay it off!
Yes you can do this - but there are far fewer providers of zero percent money transfer (as opposed to balance transfer) credit cards. They generally charge a slightly higher percentage than balance transfer cards (4% rather than 3% of the balance), but the money goes into your current account (so you then write a cheque to the loan provider).
It does make sense though.
I'm not sure you can use a credit card to pay off a cash loan. You can usually transfer other credit card balances for a fee, but not loans or similar. In general, consolidation or refinancing is a legitimate way to reduce the cost of debt but it has to be handled with huge discipline or you can end up in the soup. If the low rate is an introductory time-restricted offer, for example, you have to be fully on the ball to act the minute the offer runs out. It's important you can meet the payments in full each month (so DD a good idea) and vital that you eliminate other ways of taking on more debt (cutting up cards also a good idea)
Are there any penalties for early repayment of the current loan?
We've got a loan which currently costs us £367 a month with 2 years left to pay on it. It wasn't a bad rate of interest (8.5% I think) when we took it out two years ago.
There is about £8k left to pay on it. I've seen an offer through my bank for a Credit Card which allows up to 28 months 0% interest and I'm tempted to look for a similar offer to transfer our loan to. I can't take that particular offer as the loan is with the same bank as the credit card offer so I can't imagine they will allow us to do it...
Would you do it? The benefits (as I see them) are that we could pay off more than the current loan monthly amount if we want to and we won't be paying any interest.
Are there any pitfalls that we should be aware of or anything that makes this 'NOT' a good idea.
We haven't had credit cards for ages and so the plan will be to transfer the money and then cut up the card so that it can't be used for anything else other than paying off the loan. I would also set up a direct debit to cover the current loan payment to come off the card every month so we never pay LESS than what we're currently paying off of the loan.
Does this sound like a reasonable idea?
Also, do you think the bank with the loan would let us use the credit card offer? I guess it means that at least they're still keeping the debt (whether it be on loan or credit card)!!
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