Loan of £10k over 12 years - are 0% Credit cards the way to go?

geedubya

Hi all - looking for some advice.

I want to borrow £10k over 12 years (or less) for a car/home improvements.

If I did this using multiple 0% Credit cards in sequence using the typical figures below (including transfer fees at 3%) I'd only have to pay £100pcm over 110 months (calculated on a spreadsheet using the parameters below).

Total Borrowed: £10,000.00
Monthly Payment: £100.00
Xfer Fee: 3.00%
Card Period: 15 mth
Total Months: 110
Total to Pay: £11,000.00

The equivalent secured loans would cost me:

Nemo
Total Borrowed: £10,000.00
Monthly Payment: £134.26
Total Months: 144
Total to Pay: £19,333.44

Santander
Total Borrowed: £10,000.00
Monthly Payment: £101.00
Total Months: 144
Total to Pay: £14,544.00




Questions:

1. The difference is massive - have I got this right (calculated in excel, based on a current 0% Credit card I have, including transfer fees at 3%)?
2. Would I be able to transfer amounts up to £9k between 0% Credit cards once each interest period ran out?
   Bear in mind that the total amount transferred would decrease each time - I'd need 7 cards in total based on these parameters.
3. Is there any likelyhood of the Credit Card Companies stopping these deals?
4. At the end of the day, if things change, I could always apply for a secured load later on anyway - correct?

Opinions please?

Any suggestions/advice would be gratefully appreciated

Ta

Apples2

It is unlikely you would get a £10k limit on a new 0% CC deal. They are normally just a few k.

It is even more unlikely it would be plain sailing rolling this from one to another successively for the duration.

You are going to pay for a car over 12 YEARS :eek::eek:

Nemo - Seriously?

geedubya

Apples2 wrote: »

It is unlikely you would get a £10k limit on a new 0% CC deal. They are normally just a few k.

It is even more unlikely it would be plain sailing rolling this from one to another successively for the duration.

You are going to pay for a car over 12 YEARS :eek::eek:

Nemo - Seriously?

The car is only a small part of it - most of the loan is for home improvements.

I only use Nemo as an example - they came up in an online comparison (possibly on this site), but no, of course that's extortionate.

Santander I got a quote from.

Just started thinking about it.

JimmyTheWig

geedubya wrote: »

The difference is massive - have I got this right (calculated in excel, based on a current 0% Credit card I have, including transfer fees at 3%)?

Looks about right.
Have you factored in to account that you wouldn't get the money interest free for the full 0% period as you'd need the next one set up with enough time to be sure it would pay off the one before on time. You don't want a delay to mean you pay high rates of interest.

Would I be able to transfer amounts up to £9k between 0% Credit cards once each interest period ran out?

Depends on your credit rating. You may be unlikely to get this sort of credit limit.
Also it is very difficult, these days, to transfer money from a credit card to a current account. Unless you can pay for the stuff you need on card you may have problems.

Is there any likelyhood of the Credit Card Companies stopping these deals?

Yes, that's always a chance. There's always a chance of your financial situation getting worse, making people less likely to want to lend to you. There's always a chance of the economy getting worse and card companies pulling the plug on these deals altogether / increasing the fees, etc. You would need to consider what you would do if you got to the end of the 0% period and couldn't get a new deal.

At the end of the day, if things change, I could always apply for a secured load later on anyway - correct?

Correct, only as mentioned above you/the economy might be in a worse place at the time and a loan might be harder to come by. And remember that as far as they will see you will have a large credit card balance and are wanting to borrow more money.

Any suggestions/advice would be gratefully appreciated

Personally, I would add the cost for home improvements to my mortgage if I didn't have the money. Assuming you have the equity and the improvements will add value I don't see a problem with this.
If the car is a small part of £10k (£2k, maybe?) why not save up for this first and pay for it outright and then start on the home improvements?

Tixy

Personal opinion only - but I'd be very surprised if 0% balance transfer cards with such low overall fees/long periods are still available in 5-7years - never mind over a decade away.

somethingcorporate

Tixy wrote: »

Personal opinion only - but I'd be very surprised if 0% balance transfer cards with such low overall fees/long periods are still available in 5-7years - never mind over a decade away.

This is the kicker ^^

You're banking on what we have today being around, accessible and on the same conditions as they are at present with no guarantees at all.

Still, it would probably be a risk worth taking to keep the costs down, just try and pay it off as quickly as possible.

geedubya

Tixy wrote: »

Personal opinion only - but I'd be very surprised if 0% balance transfer cards with such low overall fees/long periods are still available in 5-7years - never mind over a decade away.

This is exactly the kind of opinion I'm interested like to hear - why do you think that?

Even if they pulled these deals, wouldn't I still be saving a bomb on the proportion of the amount I was able to pay off that way?

bankscausepain

Or you could save for a few years and then spend your hard earned 10,000gbp.

Tixy

geedubya wrote: »

This is exactly the kind of opinion I'm interested like to hear - why do you think that?

I don't believe it is sustainable long term to have such cheap deals given the way the banking sector is changing.

Not just because of the recent economic crisis but also because of the huge costs banks are having to pay out in compensation for PPI, credit card charges etc and likely there are still more revelations and more compensation that consumers will reclaim. This not only hits the banks for the historical errors, but also they lose these income streams going forward.

Plus the relatively new recent regulation to mean that payments much pay off the most expensive debt first on a card - is another financial hit for them.

Recent news suggest some banks could be hit with some pretty massive fines some time soon.

All of it points to the fact that they will have to earn income elsewhere.

On top of that there are already lenders exited /looking to exit the credit card market (Egg/MBNA - both big players for 0% deals historically). The fewer different card providers - the less truly competative they need to be.

Balance transfer offers can currently only be done between different card providers - if the providers consolidate then there are fewer opportunities to tart a debt around.

My feeling is that deals will get much shorter - and perhaps focus more on purchases deals. Balance transfers deals will reduce in the number of products and they will get ever stricter in who they accept and I suspect bt fees will increase. I also imagine that we might return to a position where annual fees on cards will become commonplace again.

Just my thoughts though - I am sure someone else could put up just as many arguments as to why the types of deals we have now will stay or even improve!

tell_it_how_it_is

To offer a different slant on it, if most of the money would be needed for home improvements, are the jobs not splittable to individual costs where you could save and spend as you go along?

That's what I've tended to do, over the last few years, including kitchen and bathroom being completely redone - in some cases it also gives you chance to haggle and save dosh here and there.

The missus occasionally has a moan over the timescales, but then I politely remind her to ask herself who is paying for most of it!

JimmyTheWig

geedubya wrote: »

Even if they pulled these deals, wouldn't I still be saving a bomb on the proportion of the amount I was able to pay off that way?

Only if you can then get a loan for what you owe.
Lets say you manage to get a 0% card to start you off now (though do note what I said earlier about transfering cash to your current account not being easy these days) and a card in 14 months to pay the first card. Then the deals dry up.
You'll have incurred a 3% fee on £10,000 (£300). 14 monthly payments of £100 would then take your balance down to £8,900.
3% on that will be £267. So after another 14 payments of £100 you'll be down to £7,767.

Now you've got to get a loan, under conditions that may well have tightened, for £7,767. When the loan company does a credit check they will see that you already owe £7,767 on a credit card company. This will flag you as being heavily in debt. You may get turned down for the loan.
You;d then be paying sky high interest rates on the credit card with no alternative.

I'm not saying don't do it. If it works then you're laughing. But it's risky.
If I was going to borrow £10k I would want to make sure I knew I was going to be able to repay it.
But then I'm the sort of person who takes 5 year fixed rate mortgages.
You may be happier with the risk.