Balance transfer to pay off a loan

arsenalbarnie

Hi can anyone help? Am helping my parents to get their debts sorted out. Just wondering if you can get a 0% credit card deal to pay off a bank loan? They are pensioners but still working and I have done a snowball calculator and reckon could get them debt free by late next year if it was on 0%. Otherwise these loans have 4 and 8 years left to run. I just want to get them debt free as at their age I want them to have the spare cash for the odd holiday and to not have to work if they don't want to, or dread to think if one of them gets ill and can't work.

Dad didn't know about any of these loans and hates being in debt, so he wants to get them cleared as quick as poss. The bank do let you make overpayments so I suppose that is another way round it.

Thanks

dizzie

Hi,

As I understand it, you're wanting to put the bank loan amount on a 0% card to reduce the interest payable and allow it to be paid off quicker?

Don't know if this is possible - but if it is, my concern would be what would happen if they hadn't cleared the credit at the end of the 0% period...because the rate on a credit card will rise to exorbitant levels then. As you'll know, the 0% rate is offered to suck in vulnerable people who can then become trapped into huge double figures interest rates. IMO it's a shoddy practice by these large companies, which is why I've never had any moral problem in exploiting 0% rates and "stoozing", although clearly you have to be absolutely disciplined.

Secondly, are there any limits on the amount of overpayments you can make on the bank loan?

Thirdly, is interest calculated on a daily basis so that an overpayment immediately reduces the interest paid? If it isn't, then all that happens is the overpayment doesn't have an immediate effect on the interest payable. We once had a loan where interest was calculated yearly and the effect of any overpayment was not considered except at that yearly review.

For fear of getting myself into a worse mess, I'd be tempted just to make as many overpayments on the loan as is affordable and without breaching any contract rules which might incur penalties. That is unless the interest rate was really quite high in which case, I'd look to see if I could get a cheaper loan to pay it off.

I've done the "stoozing" thing with credit cards in the past - putting all of our household everyday expenditure onto a 0% card and building up around £10,000 balance on a card over the year. But I always made sure that I made repayments in full every month - not to the CC company of course, but to a savings account. That way, I knew for definite that I'd have the capital to repay the card debt in full just before the end of the 12 month 0% period. The interest gained in the savings account was the money I'd made out of "stoozing" but clearly savings interest rates are lower these days

(best paying easy access account is around 3% but this is reduced to 2.4% for basic rate taxpayers).

So as an example, a steady trickle into such an account accumulating up to £10k over a year is going to give you around £120 in interest a year....not as good as it used to be, but if you are prepared to be disciplined...at least you've made £120 in the year from someone else's money (Mr Credit Card's) which I guess is free money you could use to make an overpayment somewhere else.

...and at the end of the year I'd ditch, switch and repeat it all again.

arsenalbarnie

dizzie wrote: »

Hi,

As I understand it, you're wanting to put the bank loan amount on a 0% card to reduce the interest payable and allow it to be paid off quicker?

Don't know if this is possible - but if it is, my concern would be what would happen if they hadn't cleared the credit at the end of the 0% period...because the rate on a credit card will rise to exorbitant levels then. As you'll know, the 0% rate is offered to suck in vulnerable people who can then become trapped into huge double figures interest rates. IMO it's a shoddy practice by these large companies, which is why I've never had any moral problem in exploiting 0% rates and "stoozing", although clearly you have to be absolutely disciplined.

Secondly, are there any limits on the amount of overpayments you can make on the bank loan?

Thirdly, is interest calculated on a daily basis so that an overpayment immediately reduces the interest paid? If it isn't, then all that happens is the overpayment doesn't have an immediate effect on the interest payable. We once had a loan where interest was calculated yearly and the effect of any overpayment was not considered except at that yearly review.

For fear of getting myself into a worse mess, I'd be tempted just to make as many overpayments on the loan as is affordable and without breaching any contract rules which might incur penalties. That is unless the interest rate was really quite high in which case, I'd look to see if I could get a cheaper loan to pay it off.

I've done the "stoozing" thing with credit cards in the past - putting all of our household everyday expenditure onto a 0% card and building up around £10,000 balance on a card over the year. But I always made sure that I made repayments in full every month - not to the CC company of course, but to a savings account. That way, I knew for definite that I'd have the capital to repay the card debt in full just before the end of the 12 month 0% period. The interest gained in the savings account was the money I'd made out of "stoozing" but clearly savings interest rates are lower these days

(best paying easy access account is around 3% but this is reduced to 2.4% for basic rate taxpayers).

So as an example, a steady trickle into such an account accumulating up to £10k over a year is going to give you around £120 in interest a year....not as good as it used to be, but if you are prepared to be disciplined...at least you've made £120 in the year from someone else's money (Mr Credit Card's) which I guess is free money you could use to make an overpayment somewhere else.

...and at the end of the year I'd ditch, switch and repeat it all again.

Thanks for that, will check with the two banks how they calculate the interest and then probably make overpayments and hopefully they can be debt free late next year. Apart from what they owe me! Won't expect all that back though, one day maybe. Just want them to enjoy themselves whilst they still can, who knows whats round the corner.:)