Pay off my car loan?

dutchcloggie

Hi,

I have bought a car last year on a 46 month payment plan which I am paying off with no problem. However, the interest rate is 7.4% and now that I have finally wrapped my head around the idea that a 0% credit card does not have to be a dangerous thing, I am wondering if I should pay the car loan off early with the 0% credit card.

The payments are fixed at £135.07 per month for the entire contract (so loan amount and interest of 7.4% added together). So my question is: when I ask for a settlement sum of the car loan, will they just add up all the months of outstanding £135.07? Which would mean there is no actual financial benefit from paying the loan of earlier.
Or will they reduce the amount of interest on the loan as I am paying it off sooner?
I am a newbie with loans as I tend to avoid buying things I don't have the cash for but I am realising that this can actually be worse than using smart credit card management...

Thanks.

foxy-stoat

If your 0% credit card has a money transfer deal the happy day.

You ask for settlement figure and they work it out - you will save on the interest for the remaining term.

Do cut up the credit card afterwards and make sure you clear the card balance before the interest free period or you will end up paying more.

dutchcloggie

Excellent. I just wanted to check in case, like with Virgin Media or similar, if you want to end your contract early, they simply charge you the remaining months you were gong to pay them anyway. And I just wondered if car loans might work the same way.
I am happy to pay off more every month as I can afford to do so, so I should clear the balance in plenty of time.
Thanks for the advice.

foxy-stoat

They charge up to 58 days interest on the final balance if you ask for a settlement figure or make an extra payment - but check your paperwork if you have it.

dutchcloggie

I see. But even with that 58 days interest, it is still cheaper to pay it off, so that's what I shall do. Cheers.

foxy-stoat

For you, you will have to do the zero percent shuffle once or twice depending on the deal length but it will work out cheaper yes.

dutchcloggie

It was only a cheap car so the loan is only around £4500. So I am planning to pay the lump sum difference between the credit limit of the card and the loan value. I know I know, I could have thought of this when I bought the car last year but hey, we learn all the time :-)

dutchcloggie

Oh, just wondering. If the Skoda loan people take credit card payments, I can just get a card with 0% on purchases, instead of a money transfer card, right? That would save me the fee for the money transfer?

MallyGirl

you will have to ask - many will not allow you to pay off credit with credit

dutchcloggie

Ok. I will call them and ask. Thanks for all the tips and help.

foxy-stoat

dutchcloggie wrote: »

Oh, just wondering. If the Skoda loan people take credit card payments, I can just get a card with 0% on purchases, instead of a money transfer card, right? That would save me the fee for the money transfer?

They more than likely wont accept credit card purchases and you may not get a very long 0% interest period for purchases - you need to 0% or low interest money transfer with a 0% balance transfer deal.

0% deals normally attract a fee, low % are generally fee free.