Moving debts around...loan onto credit card

sbs_2014

Hi


In January, I took a loan of £12k over 60 months at a (poor) rate of 9.9%. My monthly repayment is £255 which is made up of £200 repayment and £55 interest (it's a HSBC loan so the interest of £3,300 is divided by 60 and paid at the same figure each month). The total repayment is approx £15,300.


At the time I took the loan, I had just bought a house which needed gutting before I could move so I didn't really have a choice but to take a bad rate - I had assumed I would get a better one.


I am now 9 months into the loan and I'm looking at my options for avoiding repaying so much interest.


I have a clear Barclaycard with a 12k credit limit. There is an option on this card to move money to my bank account (with a 1.9% one off fee) at 0% interest until August 2016. The settlement figure on my loan at present is approx £10,210 so this is the amount I'd be borrowing on my credit card.


If I did this, I would continue to pay £255 per month as this is the maximum I can afford. My only worry is that if at the end of the 0% interest term I couldn't get at a 0% balance transfer to another card then I would get stuck on Barclaycard's hefty standard APR (I think this is 18.9%).


Is anyone able to offer their point of view? I have no substantial savings to pay the loan off myself and to reiterate I can't afford more than the current monthly payment of £255.


Thanks for your help

[Deleted User]

If you couldn't afford the go to rate and a new 0% deal is in doubt, then the safe course of action would be to only transfer an amount you can comfortably pay off within the promo period.

But what do your credit files show - and what is your income in relation to both your debts and available limits? You may be able to take an educated gamble on getting another card further down the line.

Just to add- your repayment is fixed at £255, but it's not £200 repayment and £55 interest. In the early stages, the interest part will be much higher.

sbs_2014

Thanks for your reply.


I don't know how reliable the credit card eligibility tool on MSE is but I've ran my details through that and it's come up with lots of long term 0% balance transfer cards with a 90-95% acceptance chance.


Also, I spoke to HSBC this morning and they said the interest is £3,300 and it is evenly split over 60 months i.e. £55 per month.

HappyMJ

As above you don't need to transfer the whole £10,210. How about a couple thousand pounds?

Another way of doing it is a 0% on purchases card over as long a period as you can get which will save you the 1.9% transfer fee. Use your 0% on purchases card for everything and instead of paying the card off in full each month you use the money to make an overpayment on your loan. At the end of the promotional period you'll owe much less on the loan and more on the credit card at which time you can make your overpayments towards the credit card instead.

foxy-stoat

You could transfer the loan onto the 0% card and pay the £255 for the 10 months which will reduce your balance to £8000 by August next year, you can then apply for another 0% card or a better rate loan. By then you would of cleared the loan off your credit file and have only the £12K limit with £8K balance on your Barclarycard, rather than trying to find a better rate loan now with a £10K loan and £12K limit on your BC.

Do you have any other borrowings?

[Deleted User]

HSBC have advised you wrongly. You make equal payments, but in the background, interest is charged daily. So the interest in your first month will be in the region of £100, dropping each month.

They equalise the payments, so that the early months are not unmanageable.

It looks as if you would stand a decent chance of a further offer (assuming you keep your files clean between now and then) so I think you could take the chance on transferring as much as you can.

sbs_2014

Thank you for your replies. I have a car lease of around £150 per month. I am joint account holder on our home mortgage and also on our buy to let mortgage (we rent a property).

adnanmanzoor

Another way could be to prepay some principal in advance if HSBC has offered you such privilege. Save few bucks each month and pay them towards the loan or if there is no prepayment facility, better start saving as much as you can and dump it in high interest rate accounts to reduce your net interest charge. Dont take new debt to pay off old debt- you are going to mess it up if by that time your credit score declines.

bearcat16

Sorry if I'm stating the obvious, but why not just get a new 0% card (or cards) with a nice juicy 34 months interest free?

MBNA and virgin money for example?

These two cards offer "money transfer" options too, so they'll pay the balance directly into your bank account (as opposed to transferring from another card) ready for you to pay the settlement figure on your loan.

If you made your £255 payments then after 34 months you'll be left with a balance of about £1,830. Much easier to manage.

If you're well organised and disciplined, you could even make only the minimum payments on the 0% card for 34 months, putting the remainder of your £255 in an ISA. That way you'll earn interest on it and it will still be sitting there ready to pay off the balance (less £1,830) after the 0% term ends.

(Note: I'd only recommend this if you are super well organised and disciplined.)