Car finance or credit card?

JRuth1

I have an existing car finance deal with a terrible interest rate (13.4%). I have available credit on a credit card with a 5.9% money transfer deal for 30 months.It seems sensible to pay off the loan with the money transfer deal but are there legal or other things I should take into account? Has anyone done this themselves?

Frozen_up_north

You can ask the car finance company for a settlement figure, it happens all the time... especially when someone wants to swap cars, etc. Many years ago I had a PCP deal to purchase a car and settled early, I don't think there are any issues, you would need to read the terms and conditions of your finance deal to be sure.

DD265

I've done it, no issues but I did settle the day after taking out the finance. Could be worth looking at the eligibility calculators on here for loans and credit cards, to see if you can get a better deal than 5.9% over 30 months. When doing a comparison remember to take into account any fees for processing the money transfer (though when I've looked before, only the 0% ones usually have an up front fee).

As suggested, read through your paperwork but I would definitely go for it.

born_again

JRuth1 said:

I have an existing car finance deal with a terrible interest rate (13.4%). I have available credit on a credit card with a 5.9% money transfer deal for 30 months.It seems sensible to pay off the loan with the money transfer deal but are there legal or other things I should take into account? Has anyone done this themselves?

Can you afford to pay the money transfer off the CC before you have to start paying the eye watering interest rate?

JRuth1

born_again said:

JRuth1 said:

I have an existing car finance deal with a terrible interest rate (13.4%). I have available credit on a credit card with a 5.9% money transfer deal for 30 months.It seems sensible to pay off the loan with the money transfer deal but are there legal or other things I should take into account? Has anyone done this themselves?

Can you afford to pay the money transfer off the CC before you have to start paying the eye watering interest rate?

There are 34 months left on the current car finance deal so, yes, can pay off in 30 I reckon. I was wondering if there are any advantages in terms of consumer protection of having a car loan not a credit card debt.

Goudy

You can settle the finance at any time.
What the finance company will do is produce a settlement figure to pay.

This settlement figure will only include 58 days interest on the outstanding capital. Not all the interest due if you completed paying the remaining, month by month.

The difference between what you would have paid if you completed the finance contract and the settlement is often described as an "interest rebate" but this 58 days is the max they can charge you by law, but their settlement quote is only usually valid for 28 days.
(I'm taking this is a personal finance arrangement and not a business arrangement).

So if the savings on the "interest rebate" outstrips the 5.9% your credit card will charge your for the transfer, then yes it's a good idea, but it could be better. Shop around for money transfer cards first.

I wouldn't overly worry too much about paying it off within the limited interest free period of your existing credit card if that period is shorter than needed.
You can always use a balance transfer credit card at a later date even if you found a cheap rate money transfer card now with only 12 or 18 months interest free.

These balance transfers tend to be cheaper to transfer balances (2 or 3%) and if you've reduced the balance on the money transfer enough, it's only going to cost you peanuts to move what's left.

I'd rather initially move a large debt at 3% for a shorter period and then move less at 3% in 12 or 18 months time than move a large debt at nearly 6% to start with.
Unlike your car finance, that 6% won't have a rebate if settled early, so less is always going to be better even if you have to shift 50% of the capital in 18 months time at 3%.
I hope that makes sense.

You will of course need to make the minimum payment each month of these types of cards, otherwise the interest on the balance will revert to their normal, sky high interest rates, so best setting up a direct debit.

 

 

born_again

JRuth1 said:

born_again said:

JRuth1 said:

I have an existing car finance deal with a terrible interest rate (13.4%). I have available credit on a credit card with a 5.9% money transfer deal for 30 months.It seems sensible to pay off the loan with the money transfer deal but are there legal or other things I should take into account? Has anyone done this themselves?

Can you afford to pay the money transfer off the CC before you have to start paying the eye watering interest rate?

There are 34 months left on the current car finance deal so, yes, can pay off in 30 I reckon. I was wondering if there are any advantages in terms of consumer protection of having a car loan not a credit card debt.

The fact you paid on finance gives you some protection S75 (even if paid off)
Paying finance off via a CC gives you NO extra protection. Especially if using money transfer.

donalduck21

I suppose it depends whether you will be able to clear the full balance of the credit card within 30 months before the interest rate goes up.  If you are paying the loan off via money transfer from your bank, should be alright; however be mindful that some car finance companies do not allow you to pay off a loan with a credit card. 

MeadowsVale

I settled the finance on my HP car last month online as there was only a few £thousand left. I remember it saying that I couldn't use a credit card though, debit only or bank transfer. This was with Blackhorse.

Goudy

donalduck21 said:

 however be mindful that some car finance companies do not allow you to pay off a loan with a credit card. 

Yes, initially you will almost certainly have to use a money transfer card.
But once it's on a credit card, you're free to move it to a balance transfer card later.

As mentioned, make sure you shop around for a low fee for the initial move of the large amount.

There will be the biggest difference in fee for this, so it will be almost certainly worth trading off the length at 0% against the lowest percentage fee to use.

Then if needed because your money transfer period wasn't long enough, you can move the reduced amount to a balance transfer card later.
As you've already eaten into the initial total you might even get 0% fee for a short time on a balance transfer card.

We did this for the Mrs, it was actually cheaper than dipping into savings to pay it off.