Personal Load or 0% Purchase credit card

doit2morrow

I am at the end of my PCP contract for my car and it's now time to pay the final payment and keep the car. I've been debating if it will be wise to pay the lumpsum of 12k through personal loan or should I take out a 0% purchase credit card. I have been saving for this and it's not availablily of funds but rather making them stretch. Now with the borrowing interest on personal loans around 7% is it even worth saving? on the other hand, Will a purchase credit card allow for such a large sum? Pls help?

DE_612183

If you take out via credit card - how long are you expecting to pay for? the 0% are usually for a short period of time - 12 months, then they go up to silly %

Nasqueron

You will not be able to pay a loan with a credit card even if you a) get such a high limit and b) the dealer would accept it (which they won't due to the fees on a 12k payment). You would need a money transfer card and are unlikely to get a card with a limit that high and as above, they're usually 12 months or so.

A loan will be judged on whether you can pay the 12k loan AND the 12k PCP as no guarantee you will use the loan for the PCP - you could just spend it on a holiday for example.

It would be wiser for you to stick to your original plan to pay off the 12k from the money you put aside for this purpose back when you took the PCP out. You can then rebuild your savings after using the money you're not putting on PCP

easyasonetwothree

My guess is that the interest on a potential loan will be higher than the interest you're gaining on the 12k savings, so I wouldn't go with the loan.

I think the 0% purchase card would be a good idea if, a) the final payment can definitely be paid by card (check with your dealer), and b) you get a limit high enough. £12k + is realistic for some, especially if you have a good track record with the bank you're applying to. Some banks will ask what limit you want. I recently got the £8k I asked for with Lloyds, but I'm unsure if they would have given more if I'd asked for it or not.

You may be able to do a part payment if your limit isn't high enough, check with the dealer. 

CliveOfIndia

easyasonetwothree said:

I think the 0% purchase card would be a good idea

The big issue will be that, even if the finance company will allow payment to be made by credit card, it will almost certainly be classed as a "cash-like" transaction by the credit card company.  Which means you'd be charged a cash advance fee, and you'd also pay interest until it's all repaid (cash advances wouldn't qualify for the 0% promotional rate).

OP, you'd need to check the interest rates you're being offered for a loan, but I'd be willing to bet that any loan will charge a higher APR than what you're getting on your savings.

By far the best approach will be to use your savings to pay the balloon payment, then rebuild your savings by making a monthly payment equal to what you were paying on the PCP (or what you would be paying if you were to take out a loan).

ManyWays

I agree with the others about using savings

But it seems likely that the car finance started before Jan 202. If it did, don't forget to see if you were charged secret discretionary commission on it, see https://www.moneysavingexpert.com/reclaim/reclaim-car-finance/