Paying off loan using balance transfer card?

simons_s

Hello

One of my goals is to be finance free by the end of 2017.

I currently have around £10500 finance left from when we bought a car at the end of 2015. The interest rate for this finance is 5.8%. We're paying this off in monthly instalments of £267. If I pay early I believe I can remove a lot of the interest and only have around £9000 left to pay. I can request an early settlement figure from Sainsburys Bank to confirm this.

What I really want is to move the finance so it's interest-free, and have a convenient way of paying it off.

I've got around £10000 in my current account left from when we paid our mortgage deposit a couple of months ago. I could use a small part of this towards paying it off but we still need to purchase things for our new house and I like the security of some money being in my account should I need it. We have around £1500 left each month as expendable income so it seems stupid to have this finance as we currently have it.

Am I correct in thinking I should take out an interest-free balance transfer card, do a money transfer to my current account for the amount of the loan, pay off the Sainsburys loan and then make payments to the card?

I had a look on VirginMoney.com and can see a 32 month 0% interest balance transfer card, with a fee of 1.69% for money transfers.

Is there any reason why this isn't a good idea or any catches I should be looking for? What would you do?

This is probably really obvious to most people but not to me so I just want to make sure this is the right thing to do.

Thanks

[Deleted User]

You need to have a money transfer option, rather than balance transfer.

If you can get one, you'll save money, as long as you prioritise the right payments and have an exit plan if the card is not cleared before the promo runs out.

Be aware that you may not get the complete limit you need, but accept what you are given.

MallyGirl

simons_s wrote: »

I had a look on VirginMoney.com and can see a 32 month 0% interest balance transfer card, with a fee of 1.69% for money transfers.

Is there any reason why this isn't a good idea or any catches I should be looking for? What would you do?

Seems sensible to me, on the basis that you have enough cash to pay the rest of the balance off if they don't give you a big enough credit limit. I did something similar recently. I only took the car finance to get 2 years free service plan and then paid off early. You can transfer 95% of the limit. Just make sure you set up a DD to pay the minimum and have a diary reminder to pay the card off before the 0% deal expires as you will only have paid off just over £3k by then if they give you a big enough limit.

simons_s

Thanks for the replies, that's helpful.

I think I'll go for it then.

I've just entered by details on VirginMoney.com and it's stated I've been pre-approved (does not do a hard credit check so I thought why not).

If I apply and they do not offer the amount I need, can I stop the application or will they continue the process but with a lower limit? If they only offer a small part of what I need I would prefer not to have the card and continue to pay the loan monthly for now.

Thanks

[Deleted User]

Once you've applied and been accepted and advised of the limit, the search will be on your file.

You could decline it, but why would you? Why would you not want to save some money?

MallyGirl

I didn't find out the limit immediately when I applied.

Nebulous2

Did you put in the amount you wanted in the soft-search tool? I asked for £12k, it told me I was pre-approved but they then faffed about asking for documents etc. It took 3 weeks but the money eventually came through.

simons_s

Nebulous2 wrote: »

Did you put in the amount you wanted in the soft-search tool? I asked for £12k, it told me I was pre-approved but they then faffed about asking for documents etc. It took 3 weeks but the money eventually came through.

Yes, I entered how much I wanted in the soft-search.

I've now applied and been accepted, however not for the full amount I really wanted. They've allowed me £7800 which is enough to move my finance so it's interest free (I will just contribute more from my current account but it should be fine).

Did they ask for the forms during the application or after the approval email?

Nebulous2

simons_s wrote: »

Did they ask for the forms during the application or after the approval email?

I didn't get an approval email. I got a holding email saying they were very busy and they were considering my application, then a letter asking for ID.

I phoned a couple of times and then had more or less given up, as I've made some other applications. Then it just burst into life with an email saying my money transfer was being processed.

Jattinder_Singh

Hi I have a 4 year PCP (1.5 years into it) and the settlement is in the region of £22k (today) and if I continue with monthly Direct Debits and the full 4 year term, the balloon will be around £13k. We like the car and want to keep it BUT I don't want to continue to pay 4.8% APR. The finance company said if I paid the £22k today I would save £2110 in interest AND there is no early settlement charges.

I've read through the previous threads and I think balance transfer to 0% would cover this and leave me in a better position as I cannot pay £22k off - but is there anything I'm overlooking or need to consider before applying?

Financially I'm in a good job, as is the wife, and we have savings - but I don't want to plough them all into this settlement and would rather keep some back for a rainy day and pay off at a lower (ideally 0%) percentage.

Thanks:money:

Nebulous2

Hi - welcome to MSE. You would probably have been better starting your own thread, as replies can become mixed up.

I have two immediate thoughts.

1) Your lender might not accept credit card payments and it is unlikely that a card will allow you to balanve transfer to a loan. What would work is a money transfer, where you can transfer the cash directly to your bank account.

2) £22k is quite a big ask in terms of credit limits. It could be possible, but you might need to spread it over two cards.