changing bank loan to credit card

monkeymayor

Hi

i am a new poster to this - but would like to ask advice


i currently have a nat west loan of £3700, and i pay in £133 a month, of which £66 is interest.

Would it be worthwhile moving this to an interest free credit card? the reason i ask is because if i do, as i see it, i will still be moving £3700 and the £66 interest a month has been factored into the loan...

any advice, recommendations would be greatly appreciated

kind regards

Monkeymayor

Tixy

Hi

and i pay in £133 a month, of which £66 is interest.

This bit is a bit of a misundersanding. Interest is charged on the outstanding balance each month it is not split equally through the whole loan term.

Is the £3700 the current balance on your loan account (e.g. the remaining capital balance)? or a settlement figure? or the amount of your remaining repayments?

To start you really need to get a settlement figure from your loan company - as that will include an early repayment fee (but won't include later interest).

Once you have that figure you need to compare it to the total amount you have left to pay if you continue at £133 a month.

If you want to move the debt to a credit card then you would specifically need to choose a card that allows money transfers, most do not.
If you were able to obtain a card that allows 0% money transfers with a sufficient limit then you then need to compare the cost of keeping your loan as is to the cost you would pay to move it. Typically you would pay 4% fee for a super balance transer card and if you keep paying the £133 then you would likely need to factor in another fee to move the remaining balance when your promotional period ends.

ItsOver

I did this exact thing recently, I had around £2650 of a loan left to pay. After the settlement fee and the money transfer fee this was bumped up to £2950.

It is now interest free until 2016 and my monthly minimum payment on the credit card is £30 instead of the £100 I was paying for the loan.

I plan to save up the £70's plus add other bits and pieces to it and pay off lump sums every few months. I should have it cleared by the end of the year if everything goes to plan.

The loan would have taken another 3 years (without overpayments).

monkeymayor

thank you both for your response. I have found out my settlement fee, which has come in £3851.01, and if i transfer this over to an interest free credit card i can potentially shave almost a year off my repayments. thanks again

monkeymayor

actually not so good news, i cant seem to get credit for the cards that offer a transfer from a loan / bank account, i can only get credit from credit cards offering a transfer from another credit card (i dont have any credit cards)

frustrating, but i think my only option is to carry on paying the bank loan off with its high interest.

if you do have any other suggestions however, they would be greatly appreciated!

Deker_2

Hi,

I haven't give it a lot of thought so you'd need to have a look at fees but it could be possible to use PayPal. You could register an account to the new credit card and one to your bank account then send a money request and pay it (you'll incur PayPal fees) but you will end up with the cash in your bank to pay off the loan.

Obviously you'd need a card with 0% on purchases rather than balance transfers.

I did similar in the past where you had to spend at least 1p per month to keep the interest rate at 0% - just sent a money request for 1p every month

As I said I haven't give this a lot of though (just reading on my lunch break) so give it some thought before jumping in.

Regards

Derek

Herzlos

A simpler approach would be to get a card with 0% purchases for a while. Use that for all your purchases and use the cash you would have used for the purchase to overpay on the loan.

It'll save you the transfer fee, but requires a lot more willpower and will take you a long time to transfer the entire balance across.

Depending on the terms of the loan and the card, you may need to transfer the balance to another card with a balance transfer offer before you start paying interest on it.