Paying a loan off with a credit card

bug23

Hi, am new to the site.
bit of background, i am not in huge debt but have a 5 year loan that i have never missed a payment on. i have recently tried to sort out my finances and realised i dont want to pay the 3000 interest on my loan (overall)

is it possible to pay off a loan using a 0% purchase credit card or does it need to be a 0%balance transfer card?

i still need to research my early payment fee but just needed to some advice
thanks

zxspeccy

Not entirely sure whether card companies would allow this, you would need to look through the T&Cs of the card, but I suspect this could be a non starter.

However if they did then I would need some more details to see if it was worth while you doing this:
How long is left on the loan?
What is the amount of the loan? and does the card limit cover it?
Is there an early redemption penalty on the loan (which you are looking into)?
How long is the 0% valid for?

bug23

there is 53 months on the loan, original amount 4438.43, i was on maternity leave at the time of the loan hence the long repayment period.
left is 4119.48, card limit is 4000 (wondered if leaving some on the loan would reduce the fee?)
the early redemption penalty is 58days interest if over 90days left on loan.
0% is 15months - would plan to balance transfer until paid off.

i can still afford the 122.97 a month i just hate that i am paying so much interest - in hind sight i should've have researched my options at the time. It would not be a disaster if i could not do it this way just that it would save me some money
in a perfect 0% interest world i could pay the money back in half the time
thank you for replying

CLAPTON

you need to read the T&C of the loan about payment options.

many loan companies don't allow payment by credit card

what credit card do you have; does it allow BT to your bank account?

bug23

to be honest i have not looked into the details yet, was wondering if it possible (!)
i currently have a clear m&s card that has 0% purchases but not on bt, so would need to get a 0% bt card if it has to be done by bt.

would there be a better way of reducing interest payment? speaking to my bank maybe?

DCFC79

bug23 wrote: »

to be honest i have not looked into the details yet, was wondering if it possible (!)
i currently have a clear m&s card that has 0% purchases but not on bt, so would need to get a 0% bt card if it has to be done by bt.

As been mentioned check the T&C's re paying off a loan with a CC.

zxspeccy

Hi again,

On a £4000 balance at approx £123 per month (even at 0%) you will be looking at about 34 months to repay (instead of 53 months at £123 with the interest), and the 0% is only valid for 15 months. So you could be looking at 19 months at standard credit card rate which will probably be more that sticking with the loan.

Also you do need to be disciplined with making the repayments on the card, the card company won’t be claiming the monthly payment from you. It will be up to you to remember to pay them each month.

As I have said earlier this is probably a non starter, it’s a bit like wanting your entire card balance put in a savings account to get some credit interest on it, whilst not paying any debit interest to the card company.

Do ask your loan company is they allow overpayments without charge, as you could save interest by over paying each month.

bug23

thank you for all your advice
it was a bit of a dream really wanting to pay no interest! naive of me really!

david39

Depending on your income, you might take a 0% card and then, when the 0% period expires, transfer to a second card at 0% - that would take you up to 30 months and a transfer back to the first card for the months remaining.

A few things to note on the above:

You need to be sure that the first card allows direct transfers to your bank account, which you will use to pay the loan company.

There is always a transfer fee of usually 3% to 4% each time you transfer.

You are risking whether you can get a second card at the required time and that 0% BTs are still around at the times you need them.

If you arrange with the card companies to take DDs at £123 each time a payment becomes due, you will not run foul of fees for forgetting to make the payments - you will need to cancel that arrangement with the first card when you transfer to the second and vice versa.

Finally, if you get sufficient credit made available, you need to be sure that you use it sensibly when your current debt is reduced.