loan or credit card

misteron1

I need to borrow £10k in a couple of months to pay off house move costs, I have a fixed isa which matures in May. If I cash the ISA early it will cost me £500. A £10k loan over 1 year will cost £261.  Would it be better to borrow the £10k , take out a credit card and put £10k on it or cash the ISA early?

CliveOfIndia

First thing to mention is that any rates you see advertised for loans will be "representative", and will not necessarily be the actual rate you're offered.  But on the face of it, if you are able to secure the rate you've based your calculations on, then the loan is obviously a better option than cashing in your ISA.

A 0% purchase credit card might be a good option, with 3 caveats.  Will you be accepted (and given a high enough limit)?  Will your removal company (or whatever else the "removal costs" entails) accept payment by credit card?  Will you be able to clear the card in full before the promotional rate expires?

If your "suppliers" won't accept payment by credit card then a Money-Transfer card is another option to consider - there will normally be a fee to pay.  And the same caveats apply - you need to be accepted and given a high enough limit, and you need to be sure you'll be able to clear it by the end of the promotional period.

In either case, if you can't clear the card at the end of the promo period, you'll start paying interest at the card's standard APR.  You may be able to transfer any balance to another card - but it would be unwise to bank on being able to do so.

misteron1

I will probably only need the loan for 2 months max as the ISA will mature then.

CliveOfIndia

misteron1 said:

I will probably only need the loan for 2 months max as the ISA will mature then.

In that case, a 0% purchase credit card will absolutely be your best bet - if you can get accepted with a high enough limit, and if your suppliers will accept payment by credit card (not all companies will).  I'd check with your removal company etc. before-hand, if they're all happy to accept payment by card then do an eligibility check to see if you're likely to be accepted for any 0% purchase cards.  If it looks favourable, then go ahead and do a full application.

The eligibility check is by no means fool-proof, and you won't know what limit you'll get until your application has been processed.  But one application won't hurt.

UNLESS ...... Is your mortgage all done and dusted?  If so then no problem, but most lenders will do a final credit check before completion.  Taking out any line of new credit just before completion is generally not a good idea, worst case you could find your mortgage offer is suddenly withdrawn.  If it's all signed, sealed and delivered then no problem.  Otherwise, taking the hit on your ISA may be the safer option.

enthusiasticsaver

I would not apply for new borrowing while you have a  mortgage application in the pipeline.  Are you sure you will definitely be completing before May?  My daughter has been waiting since last September to move house and is only likely to exchange next week even though only three in the chain.  Goodness knows why house moves take so long in this country. 

I would wait until nearer the time and if it will definitely be needed before May I think I would take the hit on the ISA unless you have available lines of credit on existing cards. 

macman

You do realise that once you withdraw the ISA cash then the tax-free status is lost? You can't replace it at a later date.