Paying off balance of car loan with 0% credit card - a few questions

flipperg22

Hi everyone

I'm after a bit of advice please - I'm looking to pay off the balance of my car loan of £5,700 using a 0% credit card - deadline is late November.

After doing a little bit of research and some number crunching on this site - I think my options are as follows:

• Apply for a Sainsbury's Nectar 0% purchases credit card for 27 months - and hope I get a high enough opening credit limit to cover this balance as a new customer (my credit score is 999 according to Experian), and pay off the full balance via credit card with a small fee of 1.44% charged by the finance company.
• Apply for a Virgin 0% cash transfer credit card (with a slightly higher 1.69% fee) which would definitely cover the whole balance, and then pay the entire amount via my usual bank account via debit card with no extra additional fee from the finance company

However, I saw on another thread that a poster had mentioned that paying off a loan with a credit card constitutes a balance transfer rather than a new purchase.

• If this is correct, does this mean that I should actually be looking at a 0% balance transfer card instead?
• Is this a question for my finance company at their end, or would I be better to check this with both Sainsbury's and Virgin before applying for either of the above credit cards?

Lots of questions, but hopefully my queries all make sense!

laingn

Hi

I'm not 100% sure but sure some knowledgeable people will be along soon but I would imagine you need a money transfer card to pop the money into your current account to pay the car loan off but it depends on if they take payments from credit cards.

20aday

You need to investigate Money Transfer Cards (eg MBNA, Virgin Money).

Please ignore your score of 999 as a lender uses their own methods in whether you'd be successful for credit or not.

Whether you'd gain credit for the amount you wish to repay depends on your income and whether or not you have lines of credit elsewhere.

Not only that if for example MBNA gave you a limit of £5,700 you could only borrow up to 95% of the limit to allow room for the transfer fee.

Might be worth checking out MBNA's soft search tool on their website and see what it returns?

Obviously you'd have to complete a hard search to know what kind of limit you'd get should you be successful.

Hope that helps OP?

flipperg22

Thanks for the responses. The Finance company have already confirmed that they would accept a direct credit card payment for the balance, and would charge a small 1.44% fee for this, which would be less than the 1.69% fee on the current best money transfer credit card (Virgin).

I have no other outstanding credit card debts (3 other credit cards with no balance which are paid off in full every month), and other than the car finance, just have my mortgage - so I would hope I'd be deemed credit worthy.

I'm just trying to work out the cheapest way possible to pay off the remainder of the loan with the smallest amount of interest (ideally none!). I'll probably put some savings towards it, but can't afford to pay the whole lot off in cash in one go.

So - in short - there's no way of knowing if I'd get a credit card with adequate credit, until I actually apply for one of the cards?

20aday

What are the limits on those credit cards and what's your income?

But unfortunately there's no way of knowing unless you apply for a credit card (Nationwide do offer this service as part of the soft search BUT it's only 0% for 12 months).

flipperg22

Annual income is £30,200 gross. The credit cards are:

• Barclaycard Platinum (£3,000 limit)
• Halifax Clarity (£4,500 limit)
• Post Office Platinum (not sure of the limit - £3,000 I think) but I've literally just cancelled this card yesterday as I haven't used it in a number of years now

JimmyTheWig

• Apply for a Sainsbury's Nectar 0% purchases credit card for 27 months - and hope I get a high enough opening credit limit to cover this balance as a new customer (my credit score is 999 according to Experian), and pay off the full balance via credit card with a small fee of 1.44% charged by the finance company.
• Apply for a Virgin 0% cash transfer credit card (with a slightly higher 1.69% fee) which would definitely cover the whole balance, and then pay the entire amount via my usual bank account via debit card with no extra additional fee from the finance company

What makes you think you would definitely cover the whole balance with the Virgin card?

However, I saw on another thread that a poster had mentioned that paying off a loan with a credit card constitutes a balance transfer rather than a new purchase.

• If this is correct, does this mean that I should actually be looking at a 0% balance transfer card instead?
• Is this a question for my finance company at their end, or would I be better to check this with both Sainsbury's and Virgin before applying for either of the above credit cards?

No need to check with Virgin about this, as if you go down that route the cash will be in your current account and you can pay the loan by debit card / bank transfer / cheque / etc.
But, yes, I'd say Sainsbury's were the people to confirm this with.

flipperg22

Hi JimmyTheWig


I've possibly misunderstood how cash transfer cards work - I presumed that when applying, you include the amount that you need, which then gets transferred to your bank account, and is then the new credit card balance to pay off. I thought that if you were accepted, then it would automatically mean that they were happy with the amount of credit that you had asked for - ie if I needed £4,000 to pay off the car loan, I would apply for that amount when applying for the cash transfer card, and the card application would be rejected otherwise?


However, I think I may have now come up with another way of doing this - pay off the car loan using my existing Halifax Clarity credit card, which I know has a limit of £4,500 (and would definitely cover the balance of the loan), and then apply for a new Tesco 0% balance transfer with 0% fee to pay over 24 months.

BadBehaviour

flipperg22 wrote: »

Hi JimmyTheWig


I've possibly misunderstood how cash transfer cards work - I presumed that when applying, you include the amount that you need, which then gets transferred to your bank account, and is then the new credit card balance to pay off. I thought that if you were accepted, then it would automatically mean that they were happy with the amount of credit that you had asked for - ie if I needed £4,000 to pay off the car loan, I would apply for that amount when applying for the cash transfer card, and the card application would be rejected otherwise?


However, I think I may have now come up with another way of doing this - pay off the car loan using my existing Halifax Clarity credit card, which I know has a limit of £4,500 (and would definitely cover the balance of the loan), and then apply for a new Tesco 0% balance transfer with 0% fee to pay over 24 months.

Money transfer works like this: you ask for an amount that is I think 95% max of your limit to be transferred directly into a bank account and it appears as normal cash in the bank account. You get a balance to pay back on your card.

If you tell them at the application stage that you wish to money transfer say £1000, that doesn't guarantee that if approved they'll give you that limit. They will give you a limit, if approved, based on their criteria, not based on how much you want.

JimmyTheWig

flipperg22 wrote: »

I've possibly misunderstood how cash transfer cards work - I presumed that when applying, you include the amount that you need, which then gets transferred to your bank account, and is then the new credit card balance to pay off. I thought that if you were accepted, then it would automatically mean that they were happy with the amount of credit that you had asked for - ie if I needed £4,000 to pay off the car loan, I would apply for that amount when applying for the cash transfer card, and the card application would be rejected otherwise?

You are right that you misunderstood.
It is a credit card primarily, which has the money transfer facility.
You may or may not get asked how much, if anything, you want to transfer on application.
You may get a limit that allows this transfer. You may get a limit that doesn't allow this transfer in full. You may get declined.

However, I think I may have now come up with another way of doing this - pay off the car loan using my existing Halifax Clarity credit card, which I know has a limit of £4,500 (and would definitely cover the balance of the loan), and then apply for a new Tesco 0% balance transfer with 0% fee to pay over 24 months.

The only problem with this plan is what if you don't get accepted for the balance transfer card, or you get accepted with a low limit. Then you'll have a balance on the Halifax card. How does the interest on the Halifax card compare with what you'd pay if you don't clear the car loan?

If you time this right you can avoid any unknowns when doing this.
Most balance transfer cards allow you the offer if you make the transfer within the first 3 months of opening the account.
So you could apply for the new card. On the application don't say that you want to make a balance transfer right away.
If you get accepted with a decent limit then make the payment on your Halifax card and then do the balance transfer.
If you don't get accepted, or only get a small limit, you can then re-think before paying off the loan.