Cheap Credit Card Loans Discussion Area

Former_MSE_Dan

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spf_2

According to my maths this technique is nearer to a loan equivalent of more than 6.4% not 2.9% as stated. For example on a 10,000 loan the balance transfer cost is £290. However as this is on the full ammount, rather than a reducing ammount (as a loan would be) then a loan of 5.3% would yield the same cost of £290 over the 12 months. Additionally, most cards operate a negative payment heirarchy and charge interest on the transfer fee raising the cost by another typically £46 over the year (16% typical APR on £290). Also as this £290 is paid up front, it looses interest that it could attract by being left in a current or savings account, pushing the total cost to nearly £350, which is approximately equivalent to a loan of 6.4% (calculated from the tool on http://www.moneymadeclear.fsa.gov.uk/tools.aspx?Tool=loan_calculator) Or am I missing something?

spf_2

Sorry to question your maths Martin! but I've just re-read the article and did not realise that you had found cards with 2 years or more "life of balance" transfer deals. Now it makes sense to me.

I'm a bit paranoid about this point because I've seen other websites stating that a "3% balance transer fee is less than half than any loan APR" which unfortunately isn't true, the equivalent APR is about double the transfer fee for a 12 month BT deal, 3X for a 6 month etc. and I know a few people getting caught out by this.

MRJBK

Hello All,
I wondered if i could reduce my loan in this way...

I have a loan with Halifax bank with £2,000 remaining and £2,058 as a settlement figure. Its circa £60 a month for the next 4years (£2,520 in total if i keep paying).

Halifax want to offer me an interest free balance transfer credit card for 13 months - but obviously if i transfer this balance of £2k, and clear it, it wont be classed as a balance transfer as it is a loan with them.

I have applied, and been accepted for, an egg money card today with enough credit to cover the loan.

Can i pay the loan off in full to Halifax bank with my Egg Money card, then transfer the balance to my NEW halifax credit card and acheive the 13 months interest free? I have calculated and i can pay this off in full by this date.

Reppyboyo

Great article, has made a future loan decision easier.

Only problem I see is that what if you need £5000, and the card you chose gives you a credit limit of £4000?
Does the credit limit not effect balance transfers?

spf_2

MRJBK wrote: »

Hello All,
I wondered if i could reduce my loan in this way...

Can i pay the loan off in full to Halifax bank with my Egg Money card, then transfer the balance to my NEW halifax credit card and acheive the 13 months interest free? I have calculated and i can pay this off in full by this date.

As far as I understand it : YES you can, but the order in which you need to do things is a little bit different to what you state

1) Status: Current loan = £2000, I assume that the extra £58 that you quote is some early redemption penalty?

2) Use your Halifax credit card to do a balance transfer of £2058 to Egg money. This will cost you 3% of £2058 = £61.74.

3) Status: You will now be in credit on Egg by £2058 and in debt on your Halifax credit card by £2119.74. As you are never in debt on the egg card, then this credit limit does not matter.

4) Now transfer the credit on your Egg card to pay off your loan.

5) Set up a direct debit on the Halifax! Lest we forget

Note that as the Halifax card operates a negative payment heirarchy you will be paying interest on the £61.74 BT fee at ~16% so the TOTAL cost after 12 months will be £129.62 (£58 redemption + 61.74 BT cost + 16% APR of this £61.74)

It's difficult to know from the numbers that you give how much of the existing repayment is interest and how much is capital repayment. But if I assume £10 is interest per month? then the cost of keeping the loan for another 12 months is £120. I have to admit that I would be tempted to stash the extra cash that you state that can afford for making overpayments into a high interest account, then use this to pay off the loan balance in 12 months, this interest should cover a significant part of the early redemption fee so the total costs would be similar, but this way you're not juggling credit cards, and if your situation changes over the next 12 months you are not committed to making the overpayments. There's very little difference (£25?) in cost either way.

terryson01

Firstly if you do not intend to pay off your Credit Card bill at the end of each month, then you should look at the Annual Interest Rate (APR), this rate is typically between 13-17% at the moment, and you should be looking for a card that offers as low an interest rate as possible.

lynseyb29

i am looking to borrow £7000 over 5 years, i have looked into a loan and my paymnts would be approx £140 a month and i would end up paying just over £1000 in interest.

My question is how much would my minimum monthly payments be and with paying fees etc, will i be saving that much by using the cards?

Reppyboyo

Bah, seems I cant do this anyway.
Just got declined by Egg Money.

Odd, never missed a payment with my old card or Loan, credit score should be fairly high.

Oh well, onwards to normal loans.

wattoogle

spf wrote: »

According to my maths this technique is nearer to a loan equivalent of more than 6.4% not 2.9% as stated. For example on a 10,000 loan the balance transfer cost is £290. However as this is on the full ammount, rather than a reducing ammount (as a loan would be) then a loan of 5.3% would yield the same cost of £290 over the 12 months. Additionally, most cards operate a negative payment heirarchy and charge interest on the transfer fee raising the cost by another typically £46 over the year (16% typical APR on £290). Also as this £290 is paid up front, it looses interest that it could attract by being left in a current or savings account, pushing the total cost to nearly £350, which is approximately equivalent to a loan of 6.4% (calculated from the tool on http://www.moneymadeclear.fsa.gov.uk/tools.aspx?Tool=loan_calculator) Or am I missing something?

Thanks for your valuable information.

Smiffyl

I want to repay my egg loan since they have cancelled my egg card (already BT'd that). I therefore don't want to use Egg Money. Is there another way of paying off a loan with a 0% BT from a credit card? (Loan is 8700 to July 2011).