Credit Card vs Loan

mumallboys

My husband and I are applying to buy a house through the Lift scheme and need to take out a loan to pay the fees and cover our moving costs. We need £3000 maximum and I was wondering if we would be best doing this with a loan or a 0% card deal as I had heard this may be cheaper due to the amount we are looking for.

Moggles_2

Have you estimated how long it will take to clear the £3000 debt in full?

To maximise the 0% period, 16 months is currently available to new customers from Virgin. There's a 2.98% handling charge

http://uk.virginmoney.com/credit-card-v3/

Moggles_2

P.S. Virgin is one of a handful of rather special credit cards which allow you to route funds from the card to your current account at balance transfer rates. (Most credit cards do not have this capability.) Apart from the handling fee, there are no other charges during the introductory 0% period

Other possibilities would be:
cards which, like Virgin, are issued by MBNA (e.g. Alliance & Leicester, MBNA itself, Sony), Egg card or the Post Office card.

Which option is best depends, to some extent, on which cards you have at the mo or have held recently.

mumallboys

We have no credit cards or loans of any kind at the moment and on the disposable income we have left we have worked out that we could comfortably pay back the debt within 60 months and with a pinch we could repay within 36 months

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 debt this way is that you can't be sure of another 0% credit card offer with a sufficient credit limit when your current deal ends and the interest rate leaps to anything up to 34% APR variable. For all we know, 0% BT deals may not be around in 16 months time and BT fees could have jumped to 5% or even 6%

Please bear in mind that the reason Virgin can afford to lend you money at 0% for 16 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.)

If 16 months isn't long enough to clear the debt, it may be safer to go for a fixed-rate loan.