Money Transfer card to clear Loans

T9090H

Hello,

Just joined so gonna post a question I have. I currently have two loans listed below:

Tesco Bank (£9k including interest) APR 8.93% current balance £3.4k left until 01/11/18 - paying £185.39 per month.

Nationwide: (10k - 5 years at 12.3% APR Current balance £2.6k left until 01/04/2018 - paying £220.71 per month.

Is it best to apply for a money transfer card and settle both loans and repay then at 0% or overpay the loans to reduce the outstanding interest? Does taking money off a credit card look bad? I can overpay by another £275 a month plus saving £450 a month for a mortgage.

Appreciate your time and await your comments.

Sazzie23

Hi

Sorry I'm not good with the maths behind this, so someone who can think that way will be along. I just wanted to say, this will only work if you actually pay the loans of credit off, otherwise do not do it, it just adds to your debt and the length of the pain.

Good luck with it.

fatbelly

Getting 19k of credit limit on 0% cards is going to be tough- but every little helps.

Use the pre-eligibility checker

http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards

T9090H

Thanks for your comments.

Fatbelly:- 19k was the total at the beginning. There is £6k left outstanding including interest. Does the maths prove I should go the 0% money transfer route?

Money_Rollercoaster

Sure if you can get a money transfer offer which gives you time to pay off the balance it should be cheaper than servicing your existing loans. The transaction fee is the key really, you want a fee of no more than a couple of per cent really.


A - What you need to do is get an up to date settlement figure for those two loans. Add the settlement figures for the two loans together and this is the amount you will need to fund using the money transfer card.


B - Then, multiply your monthly payment(s) by the months remaining on your loan. This figure will be higher than the settlement figure. Again, do this for both loans and add the figures together.


C - Deduct figure A from figure B and you know the interest cost for running their full term. You can then compare this figure with the cost of the money transfer offer. So, this figure (C) minus (A x Money Transfer Fee).

T9090H

Thanks for your comments Money Rollercoaster.

I am looking to be debt free by 1st November 2017. For the last two months I have overpaid by £92 on the Nationwide and £175 on the Tesco loan per month to bring the term down on both loans. I want to be debt free before I apply for a mortgage in December 2017. So currently £675-£690 per month is servicing debt. And £450 is saving for deposit. I have seen an offer for virgin at 1.99% fee and 32 months 0% on money transfers. I would still be paying out roughly the same each month to clear the debt. Is it best to overpay debt or save more at this point knowing if I have a larger deposit I will save in the long run?

Money_Rollercoaster

Yes, you should be better off transferring to Virgin and clearing the loans. It'll cost about £120 in fees, but that's a good saving on the interest remaining on the existing loans.


If you do decide to keep the loans and overpay, it is vital that you tell them that you want to make regular overpayments of £X to the account and set up a standing order for that. This way, the payments do save you interest and the payments aren't just assumed to be advance payments which reduce your term but don't really save interest.

T9090H

I have already contacted both providers and informed them that my overpayments are to reduce the terms of the loans. My question is would I get the credit limit I am after? I've never had a credit card before. All payments been on time for the loans.

Money_Rollercoaster

That's the $64k question. You won't know the credit limit you get offered until you've applied.

T9090H

Yes and that is key critical. Am I best to over pay and clear the debt before I apply for a mortgage then?

fatbelly

You'll get an indication of whether you are likely to be accepted from the pre-eligibility checker