Which is the best low interest cost?

The_Boss

Hi - posting here as it seems to have more credit card relecance.

I've got a loan, with £8400 to pay, 7.9% APR, over another 41 months with Tesco bank. I can overpay and save interest. Current monthly payment is £206

Or I can transfer the entire loan - settlement fee would be £7400 - to an MBNA card via my bank account, 5.9% for life with a 1.5% fee, and then £4000 from this to my Barclaycard at 0% for 15 months with a 3% fee.

I reckon I can pay the credit cards or loand off after 15 months either way.

izools

OK right let's do a few sums based on you repaying it over 12 months.

5.9+1.5= 7.4% APR on £3,400 of the loan, or 46% of the loan.

3% + 1.5% = 4.5% APR on £4,000 of the loan, or 54% of the loan.

((7.4/100)*46)+((4.5/100)*54)=5.834

Including fees, over the course of 12 months, you will save 2.07%. 2.6% over 15 months.

If it takes over 15 months to repay you won't save a penny, and if it takes under 12 months you won't save anything either - unless you xfer the barclaycard balance to another card before its interest free expires.

The_Boss

izools wrote: »

OK right let's do a few sums based on you repaying it over 12 months.

5.9+1.5= 7.4% APR on £3,400 of the loan, or 46% of the loan.

3% + 1.5% = 4.5% APR on £4,000 of the loan, or 54% of the loan.

((7.4/100)*46)+((4.5/100)*54)=5.834

Including fees, over the course of 12 months, you will save 2.07%. 2.6% over 15 months.

If it takes over 15 months to repay you won't save a penny, and if it takes under 12 months you won't save anything either - unless you xfer the barclaycard balance to another card before its interest free expires.

Thanks for that - but I thought a 5.9% rate with 1.5% fee comes out as a higer APR than that?

izools

The_Boss wrote: »

Thanks for that - but I thought a 5.9% rate with 1.5% fee comes out as a higer APR than that?

The APR depends on how long you're planning to take to pay it off.

Technically a 1.5% fee has an APR of 1.51 if repaid over 12 months but the sums are close enough.

If anyone wants to get more advanced feel free - although it won't make any difference to the APR unless you look beyond two significant figures.