Advice for paying our last loan

Moomin_Bear · 29 September 2016 at 2:14PM

Hi guys! I'm new to the forum so hope this question is allowed. I was fortunate enough that when we purchased our house, my father loaned us the extra money we required so we didn't have to get a mortgage (we do pay him interest though). I have got the balance owed to him down to £8,000 and am wondering from this point whether I could get a 0% credit card to pay him back the balance and hence save the interest? My issue is, obviously I'll need to pay him cash/cheque or bank transfer so it wouldn't go through the card as a purchase. Could this work? Is there another way or should I just keep paying him extra when we can? Many thanks xxx

Muttipops · 29 September 2016 at 2:38PM

Moomin, a couple of questions for you.
How much interest is your father charging you and do you have any savings to act as an emergency fund if required?

Moomin_Bear · 29 September 2016 at 2:44PM

I do have some savings yes, but don't want to run them down to zero to pay him off. We agreed the interest rate when we took the loan and it was a bit more favourable than the bank was offering. Not sure what the rate was but it's about £37 per month. Obviously it was on a higher balance when we took it. I could easily pay the balance off within the next year anyway, but thinking if I could save the £37 per month for 10 months, it adds up!

Muttipops · 29 September 2016 at 3:49PM

My real name is Mrs Very-Cautious!!!! ( only kidding, but that is my attitude to credit cards!).

I would keep things as they are if you can pay your father back in a year.

Because credit cards to me are a licence to use the darned things and it is easy to put other things on it and before you know it, you owe more money. So what starts out as a cost saving exercise turns into a spending opportunity.

But as I say, I am a no risk person and depends on your attitude to credit cards, even 0% ones.

Ooo, and I wouldn't use your savings either, I wasn't suggesting that, just wanted to make sure you had a safety net and weren't leaving yourself open to having nothing to fall back on.

enthusiasticsaver · 29 September 2016 at 4:23PM

You can get a 0% balance transfer card to pay your father back. Your dad is getting a pretty good interest rate off you if you pay him £37 per month. A mortgage would have been cheaper for you. You can get mortages at 1% 0r 2% and you appear to be paying him about 5-6%

MrsTinks · 29 September 2016 at 4:41PM

You would need to pick a card which allows you to do the transfer to your current account - don't forget there is a transfer fee for most of these offers (I think a few have some good offers on ATM... )

Personally unless the £37 is an issue then I would just keep hammering the loan as it stands... ok it's £370 (or a little less as you reduce that every month as you pay more back)

Moomin_Bear · 29 September 2016 at 5:06PM

Yes, I understand how it seems a high interest rate... however it has only been the £37 a month even when I owed £40,000 so really it is good, but now it seems a lot to pay with only the £8,000 outstanding hence my wondering if there was a better way. We are very good with credit cards, we have various ones for various purposes ( 1 because it gives us best rates on holidays, 1 because it gives us cashback etc.) So I'm not worried about getting into debt with it as such, it was more how to work it with it not being a "purchase".

MallyGirl · 29 September 2016 at 5:21PM

as long as you get a money transfer at 0% it will allow you to do what you want. MBNA and virgin money offer them. There will be a transfer fee though of typically 3%

[Deleted User] · 29 September 2016 at 8:39PM

Moomin_Bear wrote: »

I do have some savings yes, but don't want to run them down to zero to pay him off.

If you could get a 0% on purchases card, you could use the savings to pay off your father, then keep the 0% card for emergencies, while you build up your savings again.

That way would save the BT fee.

bobcat2 · 10 October 2016 at 8:50PM

Doesn't look like it would be worth it if you used a balance transfer card to transfer money to your bank account it would probably have a fee of somewhere around 3% so £240 total so not a massive saving over the £370 you would have paid.
If you go a purchase card and 0% for your day to day spending there would be no fee and you could use the money to pay off the £8000 sooner. However the problem would be that if you didn't get a long enough interest free period you'd then be in the position that the 0% rate would soon be expiring and you'd need to have the money available to pay that back, so maybe not worth the bother...

Advice for paying our last loan

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