Balance Transfer or Loan

CliveWeasel

Hi,


I have a debt which is due to be paid in May (last month of a 12 month interest free payment holiday). It needs to be paid in full otherwise extortionate interest rates kick in (ramping an initial £10K debt up to £24K of repayments over 5 years).


I was thinking to take out a loan for £10K at 3.7% over five years (manageable repayments and I get occasional bonuses to pay it off quicker).


Or do I have another option...


I have a card with a £16K limit, and zero balance, which is interest free for the next 14 months on balance transfers. Should I switch the loan onto here for a year to pay some off (incurring a small transfer charge - which would be lower than the loan interest), or is there a hidden pitfall to this?


I have a separate credit card which I can use to pay the loan then transfer the debt over as a balance transfer to effectively "launder" the loan into a CC balance.


The loan is the easy option but the CC can save money and I can then transfer to a loan in 12 months, by which time it should be down to about £7K.


Is there a barrier to the CC approach?

grumbler

CliveWeasel wrote: »

I have a card with a £16K limit, and zero balance, which is interest free for the next 14 months on balance transfers. Should I switch the loan onto here for a year to pay some off (incurring a small transfer charge - which would be lower than the loan interest), or is there a hidden pitfall to this?

I don't see any.

I have a separate credit card which I can use to pay the loan then transfer the debt over as a balance transfer to effectively "launder" the loan into a CC balance.

I don't understand this plan.

CliveWeasel

Thanks for the reply, the second part which you questioned was that Credit card A has 0% for balance transfers, but not for anything else.


So I was going to pay the loan with credit card B (Santander 123, so not interest free) and immediately transfer the balance to card A.


So as far as card A is concerned it has just seen a balance transfer.


And card B has seen a high interest transaction, but it was paid off immediately.

grumbler

CliveWeasel wrote: »

Thanks for the reply, the second part which you questioned was that Credit card A has 0% for balance transfers, but not for anything else.

So I was going to pay the loan with credit card B (Santander 123, so not interest free) and immediately transfer the balance to card A.

At the moment you don't have a loan, do you?
If so, what's the point in taking a loan and jumping through hoops to pay it off with a CC instead of transferring the balance to the CC directly?

YorkshireBoy

Who's the provider of card A?

CliveWeasel

Yes, I have a loan which is coming to the end of a 12 month 0% payment window. £10K rising to £24K payable if not paid off by the end of May, so I'm looking for a new home for this that avoids the 25% interest rate which will default.

CliveWeasel

Both Santander;


Card A, is a Santander zero with a £16K limit and currently no balance,
card B a 123 which I use for everyday shopping and pay each month, but wit henough headroom to manage the shift from loan to card.

CliveWeasel

So in effect:


Current position -
Loan £10K, 0% to end of May, then 25% and no early payment after this point.
Card B 123 card for daily using is paid each month
Card A Zero card with 0 balance & 16K available.


1) Transfer the loan to card B (2.2% per month no fee for cash transactions)


then immediately


2) Balance transfer from B to A, 0% for balance transfers until June 2016; Pay off over 12 months




Sorry if its not clear, and thanks for the advice

YorkshireBoy

Its highly unlikely you will be able to BT a balance from one Santander card to another.

CliveWeasel

Good point, exactly the sort of not seeing the wood for the trees sort of glitch I thought my plan would have. thanks.


Other than that, I suppose it would have worked.

CliveWeasel

Although I've done it before....