Loans to Credit Cards?

DiggingOut

I'm not sure what a loan really does for you. If you can pay £210 / month, you can clear up that high interest debt very rapidly, and loans are inflexible. What you really need to do is stop spending and pay even more on your debt.

The fact is, any legitimate lender will think it is too risky to lend to you. The ones that would "give you a chance" would charge an exorbitant interest rate, and you would be worse off than you are now.

I know that probably isn't what you want to hear, and I'm sorry about that, but it is almost certainly true.

Tim is right, you sound like you are on a one-way road as far as debt is concerned. Get off of it now, and you will always be glad you did.

Good luck.

bridiej

I have about £5,000 of my car loan left to pay, at 12.9% on a HSBC bank loan.

I would like to transfer to a life of the balance credit card, but how do I know the credit limit will be big enough to transfer this loan? ???

From
Confused of Kent !

stub451

I have about £5,000 of my car loan left to pay, at 12.9% on a HSBC bank loan.

I would like to transfer to a life of the balance credit card, but how do I know the credit limit will be big enough to transfer this loan?  ???

From
Confused of Kent !

Answer is you don't know until you try....but MBNA and Capital One are noted as being generous with credit limits.

Without knowing your existing credit limits/history, anything suggested here will be guesswork, but I would suspect that a £5k limit will be offered.

If the first credit card only gives you, say £3k, then you can apply elsewhere for the rest you need. And consider a zero % for 12 months option from Barclaycard/MBNA. On a £5000 loan @12.9% you're paying £53.75/month interest. Over 12 months you could therefore pay off £645.00 that you save - repaying the loan that much quicker.

Obviously we can't tell if there will be any zero % options when the present crop matures - and a lifetime rate might suit your risk profile better.

Darryl

Don't all credit cards require you to pay approx 2% of the outstanding balance on your card as the minimum payment each month?

If so, the minmimum payment be a lot higher than the actual loan repayment figure on a high value loan.

In such cases, while you'll pay less interest overall by switching from loan to credit card, you'll probably have to pay more back per month (initially) for this benefit.

Has Martin or anyone factored this in to their credit card versus loan calculations?

Darryl.

System

MBNA charge the lower of a number of figures, min. payment works out at £5 on my card. Not sure on LOB offers from them though.

Darryl

Taken from the FAQs of the new Texaco 3.9% LOB card:

Your minimum payment is usually 2% of the balance or £5, whichever is the higher figure.

I thought all cards used these terms (i.e.higher figure).

On a 10k loan (for example) transfered to a credit card this would mean a £200 minimum payment in the first month (plus whatever the interest charge was).

If you took out a 10k loan over 20 years at approx 6% (via a mortgage add-on, say), the monthly repayments would be approx £70.

By my quick calcs it would take 5 years of minimum payments on the credit card to get the payment down to approx £70.

So, to me, you only benefit from the payment of less interest if you can afford to pay more up front. Not always a good deal/idea IMO.

Darryl.

DiggingOut

If you took out a 10k loan over 20 years at approx 6% (via a mortgage add-on, say), the monthly repayments would be approx £70.

You would pay a huge amount of interest over those 20 years.

By my quick calcs it would take 5 years of minimum payments on the credit card to get the payment down to approx £70.

So, to me, you only benefit from the payment of less interest if you can afford to pay more up front. Not always a good deal/idea IMO.

Always a good idea if you can afford the payments. But you are right, not everyone can. But you are comparing mortgage to credit card, as opposed to loan. I don't think anyone is doing standard loans on 10K for 20 years. So the payments are going to be higher than £70 for a loan, too.

Darryl

DiggingOut

I agree with you - if you can afford the higher repayments then the 'switch to LOB credit card' idea is a good one.

True, you can't get a standard loan over 20 years. But, if you can, adding your loan amount to your existing mortgage debt is usually one of the cheapest ways of borrowing, so should be considered IMO.

You can get 'normal' loans over 10 years, and for 10k borrowed, the repayments would be approx. £110 per month (at approx 6.1%). Again, lower repayments for a good few years when compared to the minimum payments on a credit card for the same amount.

Don't get me wrong. I like the idea of switching debt to cheap credit cards. Just thought I'd point out the potential downsides to the idea, as I hadn't seen it mentioned (not even by Martin) before.

Darryl.

DiggingOut

True, you can't get a standard loan over 20 years. But, if you can, adding your loan amount to your existing mortgage debt is usually one of the cheapest ways of borrowing, so should be considered IMO.

This is especially true if you get a mortgage that allows overpayments so you can pay as if it were a loan, and clear the additional debt as quickly (or faster, because of lower interest) as the loan would have cleared.

This is especially good if you do it by standing order and leave it in place after the "loan" amount is cleared, because then you are paying off your mortgage early as well.

Jack_Gleeson

i see all these people wanting to pay their loans off quickly via credit cards but dont the loan companies hammer you for paying the loans off early ?