credit card v loan?

griffster

I'm having to buy a used car at the moment and I need to get the finance pdq for £6000. Having read through pages on this website I thought, to minimise the interest I'd have to pay, I thought I'd get a loan with a 48 month term and then pay off the balance by doing a balance transfer on to a good 0% balance transfer card, then basically become a credit card tart in moneysavingexpert terminology!

I've managed to find a loan at a decent rate (8.9%) paying £150 a month. Problem is, the application form displays some examples for the right to settle early which are confusing me a little.

I found this loan off a price comparison website and I narrowed it down to those with the lowest settlement rates (one or two month's interest). The total amount repayable is £7214.88, so I'd have thought the total interest applied there would have been £1214.88. Dividing this by 48 gives me £25.29 a month. If I was to be charged one or two months interest, I'd have thought it would cost me £25 or £50 to settle early. I may be being totally naive here...

The example in the loan application is for if I settle a quarter way in (12 months) based on paying regularly. It states that if I pay early I would have to pay £5,086. In my simplistic thinking I would have thought I would have to pay the remaining 3/4 (£4500) plus two months interest = £4550 which is £536 less!!! I phoned up the company asking them to explain this figure and the operator stated she was only a sales person and suggested I looked at the FSA website to see how it's calculated!!! Needless to say I didn't get very far on there either...

My questions therefore are:

1) are my calculations wrong above?
2) if so, how should I calculate the early repayment amount?
3) should the loan people give me an exact figure and explanation?
4) Is getting a loan and a balance transfer the best option?

I do not currently have any credit cards by the way, which is why I'm not purchasing via a credit card. Would I be better off getting a credit card and trying to balance transfer that as soon as possible to another 0% balance transfer card assuming I can get a £6000 credit limit straight away?

Moggles_2

... I thought I'd get a loan with a 48 month term and then pay off the balance by doing a balance transfer on to a good 0% balance transfer card, then basically become a credit card tart in moneysavingexpert terminology

If you're intending to use credit cards, it may be more flexible as well as cost-effective to buy your car with a credit card at the outset, preferably one which offers 0% on purchases for X months, then transfer to a new BT card when the 0% on purchases deal expires.

Note: some dealers charge a premium for credit card use.

To help you further, we would need to know which cards you have at the mo or have held recently.

Your post raises some other issues and you may get replies more quickly if you post again on the *Loans* board

http://forums.moneysavingexpert.com/forumdisplay.html?f=12

griffster

Thanks for the quick reply. I don't currently have any credit cards or have had any recently.

Good thinking there. I'll post this on the loans page as well...

Moggles_2

griffster wrote: »

I don't currently have any credit cards or have had any recently.

Presumably, you have a bank account, a regular income and you're on the electoral roll at your current address. Have you held a credit card in the last 6 years?

For more tips to improve your chances of credit card acceptance, have a look at the *Credit Rating: how it works and how to improve it guide*, especially Martin's *Manage and Improve your credit score* article

http://www.moneysavingexpert.com/banking/credit-rating-credit-score#improve

Who do you bank with? Halifax is offering 0% on purchases for 12 months to current account holders.

http://www.halifax.co.uk/bankaccounts/Extras.asp

Alternatively, 0% for 12 months is available to new customers from Tesco.

http://www.tescofinance.com/personal/finance/finance/creditcards/clubcc/index.jsp

griffster

Yes, I have a bank account with Lloyds TSB, have a regular income, on the electoral roll, but have not held a credit card in the last six years.

The loan application I mentioned funnily enough is with Tesco Finance. You're suggesting a 0% on new purchases credit card with them correct? What's my chances of having a credit limit of £6000 though?

sde

griffster wrote: »

Yes, I have a bank account with Lloyds TSB, have a regular income, on the electoral roll, but have not held a credit card in the last six years.

The loan application I mentioned funnily enough is with Tesco Finance. You're suggesting a 0% on new purchases credit card with them correct? What's my chances of having a credit limit of £6000 though?

No chance you will get a £6000 credit card limit. Youd only get that built up over a considerable time