12 months interest free or 48 months 4.9%

icedms

Hi Folks
Wanting to do some home improvements and don’t know whether to do 12 months interest free with 4% fee or 48 months no fee at 4.9% interest. 

If I decided on the first option when the 12 months was up I would transfer the balance onto another card that always has balance transfer promotions. But I’m just thinking the second option is set from the get go and if all the balance transfer promos stopped on the other card I would still be OK.
I’ve just been reading explanations of interest and still don’t get it so any help would be much appreciated.
The amount I would be borrowing would be £3,000 that would be paid within the 48 months.
Thanks 😉

onlyfoolsandparking

Your right not to make assumptions about always being offered BT,s I'm certainly keeping an eye on them and at the moment they're all over the place, one of my cards (which is 'empty' at the moment) has been offering 18/12/20 and now 16 months 0% deals with varying fees?

If you can pay off the £3k within or before the 12 month period expires then its a no brainer, if not then 4.9% is not a bad rate for £3k and if you can overpay and not take the full 48 months you would save even more in interest.

icedms

Thanks for that only fools and parking 😉 I was thinking the 48 months might be the way to go but I’m not sure how the 4.9% is charged, is it per year? 

If it is per year would the interest be £147 per year (or part year)? If it would 2 1/2 to 3 years to pay back?
thanks for the help 

[Deleted User]

It's an annual rate, charged on the daily balance.  So the interest depends on your rate of repayment.

icedms

Thanks for the response zx81 but I don’t understand what that means 🥴

[Deleted User]

The 4.9% is an annual rate, but broken down to a daily rate.  So each day, you're charged 1/365 of the rate on whatever your balance is on that day.

icedms

Gosh mind melt - so is it 4.9 apr? If that’s right I’ll go and check on an online calculator lol

MallyGirl

yes - the A means annual. So the annual rate is 4.9% which is higher than the 4% for one year deal but if you can't pay off within a year it starts to get more tricky.

northwalesd

Plugging the figures into the MSE CC repayment calculator, if you pay £70 a  month that will pay off the £3000 in 4yr 0mo at a cost of £297 in interest. The foirst option will only cost you £120, but if you want to perform another transfer after 12 months then that will (usually) have another associated cost. That presumes you will have some sort of transfer offer in 12 months time of course.