0% Credit Card vs 6.9% Loan

Lost_Prophet

I have a question about an idea I have. I have been successful in getting an M&S credit card (the 15 month interest free) and I am most likely going to get rid of my current car. I have about £5k outstanding on my car finance, the car is worth about £7k

So, I am thinking of asking for an extended credit limit (£10k maybe, if possible) and then paying off the finance on my car, selling my car privately and then purchasing a car on the credit card with whatever is left (presumably should be £5k on the M&S card plus £7k cash from my current car)

Is this a good idea and in general realistic? I currently pay about £280 on the HP so on the M&S card a payment of £300 can easily be managed. I work it out to be the first payment of £250 then each month gets lower till the end. Then a 2.5% fee to transfer onto a new card (~£200) after the 15 months has passed by

So basically, I would get 30 months of 0% credit for a price of £200

Alternative is the 6.9% Sainsburies loan/Hire Purchase

Anyone had any experience of this, advise against it, think its a good idea or anything?

Consumerist

Your credit limit will be set by the card company according to its assessment of the info you provide them on your application and your credit file. They are unlikely to extend your credit limit beyond that.

If it is assumed, however, you get your £10k credit limit and you use it all to repay finance and buy your new car then after 15m @ £300 you will still owe about £5.5k.

If you are able to transfer the £5.5k to another card for another 15m @ £300 then you will still owe £1k at the end. I don't quite understand your reasoning that payments will reduce over the 30 months.

Can you be sure you will be offered a £10k loan at 6.9% or is this a "representative" rate? Over how long would you take the loan?

You say that £300 pm is easily managed; what effect would an increase in mortgage rate have on that?

YorkshireBoy

Assuming your plan goes to, er, plan, the dealer will most likely charge a 3% fee for using a credit card. If he doesn't (and hence absorbs it, rather than passing it on to you), then you didn't haggle hard enough on price.

Why not buy Sterling travellers cheques with the card from an M&S bureau de change, pay them into your current account, and use hard cash instead? There's a 1% fee so that's a 2% saving straight away...plus whatever discount you get for paying cash. And best of all, the TCs are treated as a purchase so qualify for 15 months 0%.

Have you already confirmed that the finance company will take a credit card payment for the balance outstanding?

And finally, you're going to need an impeccable credit rating/history, and a very good salary, to get anywhere near a £10K limit with M&S.

Good luck!

Lost_Prophet

@Consumerist - The payments will reduce on the credit card as it is 2.5% of the outstanding balance and the outstanding balance will reduce as a result. Although realistically I wouldn't allow this to happen and would ensure say the payment never falls below £200 a month. Also, I rent so I have very few variable commitments. I haven't had it confirmed that I can get the 10k loan, but Sainsburies offer £10k at 6.9% so can apply and have a good credit rating so assume I will be successful. The loan probably would be taken over 3-4 years depending how much I actually take (if the car is worth £10k the loan will be for £8k)

@Yorkshire - the credit rating is fine, but like you say, the £10k credit limit is probably unachievable. My question was proposed in an ideal world that unfortunately we do not live in. It doesn't hurt to ask them for extra though I asked the finance company and they did say they would take a full payment, didn't ask about a credit card though My plan was to do that with the Travellers Cheques for a holiday I have coming up but that was before my brain wave about the car.