Using 0% card to pay off car

Mjkpio

So I was reading the MSE email and saw the "Longest-EVER 42mth 0% debt shift" section... normally I skip over this as I have no credit card debts that I can't pay off during the month, but it suddenly occurred to me that I do have a debt for my car.

I'm using VW finance and probably have about £10k left to pay on it (including interest). I'm paying a decent amount per month for it (but have to for work).

Thought process... use the "Longest-EVER 42mth 0% debt shift" to pay off the car finance thus removing the extra interest to repay plus own the car outright, and pay off the reminaing balance on the card either at the same monthly payment quicker, or lower payments fo rthe duration of the card.

Thoughts? Is this possible? Am I talking out of my a*** or am I on to something?!!

[Deleted User]

Does the card offer a money transfer option?

Candyapple

The "Longest-EVER 42mth 0% debt shift" card is a balance transfer card so no good for your situation. You need a card which offers money transfers: http://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs

The longest currently available is Virgin for 32 months. However you may run into problems getting a £10k+ credit limit so you may need to take out 2 cards (MBNA) in order to meet your target.

YorkshireBoy

Candyapple wrote: »

The "Longest-EVER 42mth 0% debt shift" card is a balance transfer card so no good for your situation. You need a card which offers money transfers: http://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs

The longest currently available is Virgin for 32 months. However you may run into problems getting a £10k+ credit limit so you may need to take out 2 cards (MBNA) in order to meet your target.

It's actually 40 months.

And MBNA have a 36 month product.

Obviously fees vary with duration, so OP will have to factor this in when deciding which is best for them.

Mjkpio

OK, thanks for the comments guys. Useful info and will look into it, but may just leave things as they are as I'm not sure it'll save much.

YorkshireBoy

Mjkpio wrote: »

OK, thanks for the comments guys. Useful info and will look into it, but may just leave things as they are as I'm not sure it'll save much.

Am I talking out of my a***

(Almost certainly) yes.

Mjkpio

YorkshireBoy wrote: »

(Almost certainly) yes.

What I mean is the amount I'd have to pay back monthly is almost the same and I certainly don't want to pay more back a month than I already am. I know it'll save more interest wise, but at the moment I can hand the car back in a year and walk away if I want.

Candyapple

Mjkpio wrote: »

What I mean is the amount I'd have to pay back monthly is almost the same and I certainly don't want to pay more back a month than I already am. I know it'll save more interest wise, but at the moment I can hand the car back in a year and walk away if I want.

So are you paying back £100 per month?

If you went for the Virgin one (32 months at 0% with 1.69% fee) it will cost you £169 for the fee and your minimim monthly payment would be £100 for 32 months.

The point of it all is you would be putting aside £212.50 per month in a high interest savings account so come the end of the 32 month period, your £10k is paid off.

Mjkpio

Candyapple wrote: »

So are you paying back £100 per month?

If you went for the Virgin one (32 months at 0% with 1.69% fee) it will cost you £169 for the fee and your minimim monthly payment would be £100 for 32 months.

The point of it all is you would be putting aside £212.50 per month in a high interest savings account so come the end of the 32 month period, your £10k is paid off.

How'd you get the £100? I'd want to pay off the full amount within the 32 months (if not quicker).

So £10000 + 1.69% = £10169 / 32 = £317.78. It saves a bit of my current payment but not much. And drags it over 21 months more than my current finance contract. BUT I know it saves me the interest I pay, which was something like 10.5% from VWFS.

Candyapple

Virgin's minimum monthly repayment is 1% of the balance. 1% of £10k = £100 which is what you would pay monthly for the 32 months (£3200).

If you wanted to clear the £10k in that time period you'd need to be paying £312.50 per month.

Given that £100 is what you contractually have to pay Virgin, the remainder is what you put in a savings account so it's earning interest and then when the 0% period is close to ending, you use those funds to pay off the remaining balance (£212.50 x 32 months in savings account = £6800).

YorkshireBoy

You'd pay £100 a month and save the other £200+ per month in an account paying 5% AER.

At the end of the deal you'd repay the credit card and the interest earned (along with the interest saved) is your 'profit'. It will not be insignificant.

Needs some discipline though. If you haven't got any best you stay as you are.