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Is it worth paying off a bank loan with a credit card?

(11 Posts)
saramoon Mon 22-Jun-09 20:51:11

We've had the bank loan for a while, it is now about £7000 i guess, maybe more, haven't checked recently but it is the only debt we have as we have no overdraft, mortgage or cards. Anyway this may sound like a stupid question but would it be worth us getting a credit card - or two - and paying off the bank loan with them or just stay as we are. I hate having it, it was basically overdrafts and a trip to see DHs mum in Africa that did it. We pay about £200 a month. Would it be worth just trying to pay more each month. I asked in the bank once if they could tell me how much i would have to pay each month to pay it off in say 1 year or 2 years but they couldnt tell me.

AMumInScotland Mon 22-Jun-09 21:06:57

You normally get a better interest rate from the bank than you would from a credit card, so you're better off leaving it there (but check the interest rate on your statement against what you might get on a credit card to be sure). Then pay off as much as you can, as fast as you can, from your normal income - that will cost you the least amount overall.

annh Mon 22-Jun-09 23:43:45

Unlikely that you will pay less on a credit card than a bank loan but worth checking. What is the rate of interest on the bank loan and what is the rate of interest on the credit card you are planning on getting? Sometimes you can transfer balances onto a new card at a low rate but I think that is usually amounts from another credit card, not loans. Also check what happens if you miss a payment for some reason on either the bank loan or credit card? If you are getting a good rate on the card, you will probably lose it by not making payments on time. I think the bank loan will win out.

You talk about paying it off in a short time but if it is about 7k and you are paying 200 a month you will have to up the payments considerably to do it in a year or two. I can't understand why they couldn't tell you what the payments need to be in order to pay it off in that period of time. Go in again and tell them you want to know, it's not rocket science! Alternatively, make a firm decision about how much you can pay and ask them to calculate the repayment based on that amount.

LadyOfWaffle Mon 22-Jun-09 23:47:06

If you can get a 0% deal... but you run the risk of paying a high % if you cannot get another good deal when it runs out.

annh Mon 22-Jun-09 23:54:30

Ooh, had another thought, if for some reason you do get a credit card, lock it away or cut it in half so you don't end up spending money on it and never paying off the loan!

trixymalixy Tue 23-Jun-09 00:13:10

Normally no, the rates on credit cards are higher and the minimum repayment smaller, so it'll take longer to pay back on a credit card.

Ask the bank what your APR is and try and switch to a lower rate loan. Will they allow unlimited overpayments?

MrsBonJovi Tue 23-Jun-09 00:26:28

Almost certainly not. Credit cards APR are often variable wheras a loan is normally fixed. Cards normally have higher interest rates also. You would be best placed saving any additional money you could and look into early repayment if poss.

SOLOisMeredithGrey Tue 23-Jun-09 00:42:30

Keep the loan but try to pay more each month to get rid of it earlier. Credit cards are usually(almost always) higher interest rates and special deals don't last that long, plus, you'll have a tranfer fee to pay too which would put even more onto what you owe. I think it's 3% which would be<runs out of fingers>£210 and that's a whole months payment to your bank.

midlandsmumof4 Tue 23-Jun-09 00:58:15

Agree with MrsBonJovi-When you take out a bank loan its usually over a fixed period and you either carry on at your present rate or ask for a settlement figure and pay that off in one lump sum. You could shop around for a lower rate but failing that,if they don't allow you to pay more off each month-pay as much extra as you can into a seperate account until you can afford to repay early.

LoveBeingAMummy Tue 23-Jun-09 09:10:40

Some banks do let you pay more so ask again and move it if they don't, you might even get a lower rate if you move it. If you can't do that AND are not able to move the loan then still save extra money each month and put in another account. They may still let you pay it off early once you have enough.

saramoon Tue 23-Jun-09 13:54:41

Thanks everyone. Think I will stick with the bank loan. I did go in a few months ago and asked if we could increase the monthly repayments but they told me that i could only do that if i borrowed more money from them!!!! Then she had the cheek to say, 'is there anything you need money for?'
But i can pay in more if I want to so guess that is what we will have to do. Just difficult at the moment, DH had 4 months off work with half pay and has just gone back so any extra money has been saved for that really. Thanks again, i will go into the bank on my day off this week.

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