borrowing money 2 pay off loan?

alirob12

Hi there, I heard martins radio interview and heard that it is possible to pay off my debt of around 4000 pound with the use of credit cards? Does anyone know exactly how it works? I heard that capitol1 and texaco plus virgin cards are good with 0% interest and then about 3.5% on the balance so is it possible to borrow money on the credit card and pay off my debt (14% interest) with that money and then pay off the credit card ( i am able to pay around 100pounds/month) and only getting charged 0% for 6 months and subsequently 3,5%? can anyone confirm that for me and possibly explain how it can work?? Thanks a lot

Reaper

It is possible, however there are a few things to be aware of.

Firstly most credit cards will not allow you to pay off a loan, just other credit cards. Fortunately there is a way round it as some cards either allow it or allow you to pay money to your bank account from where you can pay off the loan. Read up on Super Balance Transfers. Even cards that don't allow it can then be used by chaneling funds through an SBT card. Egg is a good card to start with.

Secondly be aware that many loans penalise you for paying them off early. Check if your does.

Thirdly, you need to keep rotating the debt onto new cards as the 0% offers run out. Your ability to do this, and indeed get 0% cards in the first place, depends on your credit rating as well as your current levels of debt. Furthermore you should always assume the worst and plan for what you would do if you couldn't renew it. You need a "Plan B" as to how to pay off the debt early or move it somewhere cheaper than the excessive rates charged by credit cards.

Finally, don't forget you need to keep paying the minimum amounts on the cards which can be quite high. Missing even one payment might result in the 0% period being ended prematurely.

PS The above is aimed at 0% cards. Another option is a long term low rate card. Read about "Stable Relationships" within this article.

zcaprd7

alirob12 wrote:

Hi there, I heard martins radio interview and heard that it is possible to pay off my debt of around 4000 pound with the use of credit cards? Does anyone know exactly how it works? I heard that capitol1 and texaco plus virgin cards are good with 0% interest and then about 3.5% on the balance so is it possible to borrow money on the credit card and pay off my debt (14% interest) with that money and then pay off the credit card ( i am able to pay around 100pounds/month) and only getting charged 0% for 6 months and subsequently 3,5%? can anyone confirm that for me and possibly explain how it can work?? Thanks a lot

Capital One - not sure they are doing the low life of balance deal anymore?

Texaco is 3.9% APR for the life of the balance - but is ending soon.

Most will be 0% for x amount of months (6-9) and then shoot up to way more than 3.5%!


Also you'll have to pay around 3% of the balance each month as a minimum payment - this could be quite high to begin with i.e. more like £120.

Another hurdle is if you only managed to get a 14% rate on your loan I doubt you'll get very large credit limits (if at all) on these cards - some of them keep it low to prevent you from taking advantage...

And like Reaper said, you have to be able to get hold of this cash into your bank account - only Egg and MBNA cards do this.


Don't want to put you off but its not a cake walk and you have to be careful otherwise you could end up paying more than 14% APR...

Galstonian

You need to establish if paying off your debt will save you any money. Get a redemption figure from the lender.

You should also establish what your credit rating is like by applying for Equifax and Experian reports (£2 each)

If you can save money and you can get credit then you probably want to create some kind of backup plan in case you end up running out of deals. Cahoot do a flexible loan that is ideal as you can choose not to draw on the funds immediately.