Can I pay off a personal loan with a credit card?

Lesa08

I have a loan with lloyds tsb and owe 16000 paying £370 a month. Can I pay it off with a credit card and then pay off the credit card each month? As im struggling with the payments each month, but always manage to pay them so im not in arrers. The interest rate is 11.2% with my loan so its quite abit! Which is the cheapest interest rate credit card or can I go for one of the 0% for 15 months & then swap to another one when the 15 months is up??

xxx

skyrider007

Yep you can via MBNA's super balance transfer.

Lesa08

How to I go about doing this & is there any charge?

skyrider007

Lesa08 wrote: »

How to I go about doing this & is there any charge?

Go to https://www.mbna.co.uk and apply for the platinum card. BT fee is 3%, I think. They will also give you CC cheques (0% promotion, 3% fee).

Moggles_2

If you will have savings to pay off your credit card balance before the 0% period expires, that's great. The risk in paying off a loan this way is that you can't be sure of another 0% credit card offer with a sufficient credit limit when your MBNA deal ends and the interest rate leaps to anything from 16.9% to 34.9% APR variable. For all we know, 0% BT deals may not be around in 12-15 months time and BT fees could have jumped to 5% or even 6% across the board :eek:

The reason the card providers can afford to lend you money at 0% for X months is because, more often than not, customers do not clear the debt and end up paying crippling interest when the promotion period ends. This is the main way lenders claw back the cost of these promotions. If this were not the case, these 0% offers would have dried up long ago.

Also, you'll need to factor in the balance transfer fees and check your loan Ts & Cs. Some providers charge an early repayment penalty if the loan is settled in full before the scheduled date.

CLAPTON

be very very cautious

370 on 16,000 is about 2.3% per month... if you are struggling with payments now make sure that your CC will charge less.... many now are charging betrween 3 and 5% per month

also you are very unlikely to get a credit limit of 16,000

and its also not certain that when the 0% rate is up you will get a replacment card at 0%.. who knows you may then be stuck at much higher rates.

You would be much better looking at your income and spending and find ways for increasing the amount you can pay back each month.

JimmyTheWig

Basically, you need a credit card that allows you to do a balance transfer into your current account. Some will term this as clearing an overdraft. It doesn't actually matter if you don't have an overdraft.

Once the money is in your current account you can use this to pay off the loan (though check for early repayment charges, etc).

Note that not many cards allow you to do this. Most cards will only let you transfer a balance to another credit card. This site refers to transfering a balance into your current account as a SBT (super balance transfer).

Do you have any credit cards at the moment? If not, you are probably best off with Virgin, part of the MBNA family. See http://www.moneysavingexpert.com/cards/balance-transfer-credit-cards#best.
If you do have existing credit cards, let us know which ones and we can advise from there.

There will typically be a 3% balance transfer fee.

There is no problem to switch to another 0% deal when this one runs out, assuming companies are still offering them then. Obviously this would involve another 3% (or whatever the going rate is at the time) fee. This would, in effect, reduce your interest rate down to just under 3% - much better than you are paying now!

An alternative would be a low life-of-balance balance transfer, for example Barclaycard's 6.5% deal. See http://www.moneysavingexpert.com/cards/balance-transfer-credit-cards#cheapest. it works out more expensive than shifting between 0% deals (known as tarting) but means you don't have to risk not being able to get a 0% deal when the current one runs out.


Note, however, that whichever route you follow you may well not get anything like a £16k credit limit on a credit card. But even if you can get, say, £5k at 0% that is better than paying 11.2% on the whole lot.

YorkshireBoy

JimmyTheWig wrote: »

Note, however, that whichever route you follow you may well not get anything like a £16k credit limit on a credit card. But even if you can get, say, £5k at 0% that is better than paying 11.2% on the whole lot.

I'm not sure you can partially settle a loan can you? Anything less than £16K and the loan would need to be re-financed wouldn't it?

OP, the problem here is that, by your own admission, you're struggling with the repayments. The card providers will know this as well, provided you're honest with your income (and you should be!), when they search your file because they'll see all your debts and the amount you're paying. ie your loan may show as £370 x 60 months.

As CLAPTON says, when you get to the heady heights of £16K loans (and are struggling with the repayments) you generally don't have the option of 're-structuring' the debt to reduce the interest charged. Therefore your only options are to either earn more...or spend less.

Good luck.

JimmyTheWig

Hadn't thought of that.
Have never had a personal loan.
Just assumed that if you could pay off the full amount you would be able to pay off some of it.

In which case

CLAPTON wrote: »

You would be much better looking at your income and spending and find ways for increasing the amount you can pay back each month.

looks like the way to go.

The quicker you can get it paid off the better.

YorkshireBoy

JimmyTheWig wrote: »

Hadn't thought of that.
Have never had a personal loan.
Just assumed that if you could pay off the full amount you would be able to pay off some of it.

I haven't had a loan for many years, but I probably should have said "and benefit from partially settling". ie you may be able to repay some of the loan but they may not discount/reduce the interest charged? Therefore better to re-structure?

I'm no expert though. CLAPTON (or anyone else)?

CLAPTON

For any loan taken out after May 2005, the CCA regulates the settlement charges (i.e. if the loan is paid off early) but unfortunately they say nothing about 'overpayments'... so it up to the specific loan company.

Many infact do allow overpayments that reduce the total interest paid but you need to read the T&Cs of the specific loan - which are often pretty opaque (they are often marketed as 'flexible' loans). Unfortunately I have no specific knowledge of LloydsTsb loans.