Using credit cards to pay off a loan?

smiler289

Hi!

I have a loan with Natwest, current balance £8200. I asked Natwest if I could pay the loan using a credit card or cards and they said maybe but not by using their own. This has left me abit confused, surely I can use a credit card to pay for whatever I want? Natwest werent much help, they just wanted me to take another loan out with them which is the total opposite of what am trying to do.

I have some money saved up from the sale of a car and want to use that to pay off the loan and use a credit card or cards to cover the rest, then transfer the balances on the cards to a 0% card so I'm not paying anymore interest and I can pay as much off when I want to, obviously I have to pay the minimum. I know I will incur a 2 month interest penalty by paying the loan off early, its a 3 year loan and am currently only 4 months into it. The loan was for £8800.

cheers for any help.

Smiler

Mark7799

smiler289 wrote: »

Hi!

I have a loan with Natwest, current balance £8200. I asked Natwest if I could pay the loan using a credit card or cards and they said maybe but not by using their own. This has left me abit confused, surely I can use a credit card to pay for whatever I want? Natwest werent much help, they just wanted me to take another loan out with them which is the total opposite of what am trying to do.

No - credit cards are not legal tender, no-one has to accept them as payment. Nat West may decide to refuse a payment on commerciality, why should they let you transfer a debt to a lower rate of interest with them?

I have some money saved up from the sale of a car and want to use that to pay off the loan and use a credit card or cards to cover the rest, then transfer the balances on the cards to a 0% card so I'm not paying anymore interest and I can pay as much off when I want to, obviously I have to pay the minimum. I know I will incur a 2 month interest penalty by paying the loan off early, its a 3 year loan and am currently only 4 months into it. The loan was for £8800.

cheers for any help.

Smiler

If you are using a credit card to do this, check beforehand how the credit card company will treat the payment - some may regard it as a cash advance and charge you accordingly.

Moggles_2

Transferring a loan to a credit card is not straightforward. Only a few rather special credit cards have this capability.

A card issued by MBNA (e.g. Alliance & Leicester, MBNA itself, Sony, Virgin) Egg Visa or the Post Office card, will allow you to transfer an overdraft, in other words, transfer cash from the credit card to your current account. From there you can pay off the loan

Alternatively, you can use Egg Money (not to be confused with Egg Visa) in conjunction with any low-rate balance transfer card.

Mint periodically issues credit card cheques, which can be paid directly into your current account

Moggles_2

The risk in paying off a loan this way is that you can't be sure of another 0% credit card offer with a sufficient credit limit in X months time when your current 0% deal ends and the interest rate jumps to anything from 15.9% to 27.9% APR or higher :eek:

Always bear in mind that the reason a card company like MBNA can afford to lend you money at 0% for X months is because, more often than not, customers do not clear their debt and end up paying extortionate interest when the promotion period ends. This is the main way MBNA increases its customer base and claws back the cost of the promotion.

Also, you'll need to factor in the balance transfer fees and check the loan Ts & C's. NatWest, as you've said, charges an early repayment penalty if the loan is settled in full before the scheduled date.

CelticStar

I did this by using an Egg card a few years ago. I don't know about now but back then I just did a balance transfer from the loan to the Egg credit card and then transferred again onto a 0% credit card (the egg one was not 0% at the time and was the normal Egg card not Egg money). The problem is that since then all the 0% cards have introduced balance transfer fees so you have to weigh up whether you will pay it off in a short amount of time or whether it is worth paying the BT fees every 6-12 months when you change 0% cards or whether it is better to keep paying the interest on your loan. Everyone's circumstances are different though so only you can work that out. It was great for me at the time though and saved a lot of dosh.