Pay off student loan with 0% card

poozer140604

My husband & I will be applying for our 1st mortgage at the end of this year & saving hard but also thought it was important to start paying off his GBP 7000 student loan (it's with the Student Loan Co.) I thought it might be a good idea to take out a 0% new purchases credit card to pay it all off this month, then paying it back over the next 9 months.We have no other debts.

Does this sound like a good plan? Will taking out a 0% card affect our credit rating & chances of getting a mortgage? Would paying the student loan debt on the card count as a 'regular' purchase or as a cash withdrawal?

Thanks,
Su

joughtib

I'd be very surprised if you can pay the Student Loan with a credit card. The Student Loan Company website says that you can pay with DEBIT card, but not CREDIT card.

kathfisch

Most credit cards with 0% interest rate offers now charge a fee for doing the transfer, so it might not work out as cheap as you hope. Also bear in mind that a student loan is not like other loans, if something were to happen and you couldn't work you don't have to make payments, not so with a credit card. Why not save up all the money that you can and stick it in a high interest savings account, you'll earn more interest than you're paying on the student loan!

oscar52

There would be nothing to stop you taking out a card and applying for a money transfer to a currenat account - currently MBNA (who also issue Virgin A&L and Abbey) and egg can do this. However, why would you want to, student loans are the chepeast form of borowing. The high interest account sounds a good idea toi me.

DavidHM

Does this sound like a good plan?

Not really; the 3% balance transfer fee will be more than the interest you would have paid over the nine months.

Will taking out a 0% card affect our credit rating & chances of getting a mortgage?

There'd be no negative effect. There might even be a small positive effect in that the minimum payment on the card might be less than on the student loan and so you would have more "disposable" income available for calculating the amount they would allow you to borrow.

Would paying the student loan debt on the card count as a 'regular' purchase or as a cash withdrawal?

It'd have to be a "super balance transfer" as above.

james32_uk

Just pay more off on your student loan. You could even wack an extra amount from your wages each month into a separate savings account earning more interest that youre paying on your student loan and then use it to pay off a big lump of your student loan which will help your cashflow when it comes to applying for a morgage.

Oldernotwiser

You say "start" paying off his loan. Does this mean that he's still eligible to defer it. If that's the case, why do you want to start paying it off early? The terms of the student loan are very lenient so I can't see any point in switching it to a more stringent type of borrowing.

poozer140604

So if he is eligible to defer we should just stash our savings away into a high interest account then pay it all off before we apply for a mortgage? Student loans affect a mortagage application but does not affect credit rating right?

It would have been a 0% card on new purchases, not on balance transfers I would have taken out but that looks to be a moot point now that the tide of opinion has changed my mind!:D

oscar52

You can only defer student loans if they are pre 1998, after 1998 the rulings changed and the apyments automatically get taken from your wages at source providing you earn over 15K per annum

DavidHM

It'll only affect your mortgage application if you have loan commitments going out every month and, after the loan commitment you do not have sufficient disposable income to pay the mortgage (but without that loan you would).

If you could use the £7,000 you would otherwise save as extra deposit and get the mortgage afterwards, paying back the student loan at the minimum payment each month, that would be cheaper in the long run (but whether or not this is possible depends on your circumstances).

What you would effectively be doing then is stoozing out of the student loan against the mortgage.

A mortgage is still debt, and you're still paying interest on it and whilst it may be sensible to borrow money in this way for a house purchase, a student loan is cheaper, less stringent debt.