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Exodus · 10-31-2007, 02:06 PM

I often get in the mail checks to borrow money from a credit card for a low interest percentage for the life of the loan. It seems like it might make sense to pay off my car by putting it on a credit card. Is this wise or foolish?<br />

jpgMaster · 10-31-2007, 02:06 PM

It depends on the CC offer. Most of them offer a low transfer interest rate, but READ THE FINE PRINT> it is usually only good for a certain period of time then the rate jumps quite a bit. also if you are late just one time, then the interest rate will jump to near 30% depending upon the credit card company.
In the long run, you are better off to stick with an 8% rate because you know it will not change.

hamad · 10-31-2007, 02:06 PM

You may not be able to pay off your car loan with a low interest rate in a year because that's all they offer- A low interest rate 3.9% for one year. However, you can take out the money enough to pay partial of your car loan in one year. For instance, if you owed 15,000 on your car loan, ask the credit card company to deposit 5000 into your checking account at 3.9. use that money to pay your car loan.

It seems a bit complicated because you will have 2 payments, one with your car payment and the other with your credit card company. However, instead of paying the whole 15,000 at a higher rate, only 10,000 at 8% and 5000 at 3.9%.

If you take the whole 15,000 at 3.99, at the end of the promo, your contract rate maybe higher than 8%, you maynot be able to pay it, you'll end up with a much higher rate.

If you have a credit card offers at 3.99 promo and a contract rate less than 8% then I would take the money to pay off the car loan. Because after the promo runs out, it's still beneficial because it's less than 8%

Check your contract rate. It's not necessary that you'll pay 22% or higher. If your contract rate is only 13%, that's what you pay when the promo rate runs out. Call the credit card company and ask them.

Try to get an offer at 0%. Lots of credit card companies offer that rate.

Credit card comapnies are not snakes, If you know how to play the game, you still can come ahead. I use credit card all the time. I borrow money short term and pay it off but not go over my head. I won't get myself in debt. You have to pay close attention when using credit cards. They get people who don't pay attention and don't know how to use credit cards.

Pilot · 10-31-2007, 02:06 PM

uhhh no. Focus on paying off your car loan and don't get another one. Pay cash for what you drive, it is possible.

Lets say you do this transaction and you are late by one day, hour, whatever, your % jumps to about 22%, now you are paying more. And that late payment will hurt your credit and you won't be getting anymore low percentage rate deals again. If you are late on your car loan one day your rate won't jump.

Just live on beans and rice and pay the thing off. Credit card companies are snakes, avoid them

Alex3 · 10-31-2007, 02:06 PM

The answer is: It depends.
First, closely, closely analyze the offer. To lure potential borrowers, credit cards frequently offer a very low rate that spikes after just a few months. If the company is offering that rate for the life of loan, read that part very carefully, and I'd even go so far as to call the company directly. What other requirements come with the offer? You maybe locked into the card for a period of time or there may be other purchase requirements associated with the offer.
Second, how is your current credit? There's no perfect formula for raising your credit score, but generally, secured debt, such as a mortgage or a car loan, is a greater benefit to your credit score than credit card debt.
Third, have you any other options to refinance? Depending on how much remains on the car loan, you may be able to get a lower rate from a competing financial institution. How much longer are you going to be paying the loan? Does your current loan have an early payment penalty? This may cost you more than you would potentially save.
If, after reviewing these options, it still seems to save you 4.1% on your loan, it may be wise to proceed - but cautiously! Be sure to read all the fine print to make sure you're not surprised by a rate hike that turns 3.9% into 13.9%!

valentina · 10-31-2007, 02:06 PM

Cred card intrest is compounded monthly, car loans are annual. Even if the rate on a card is lower, your paying 3.9 that every month. With the exception of you getting money to pay oit off within a few months, credit cards just keep you on the hook paying for months and even years for something you have bought and repaid back many times over.

Hawa · 10-31-2007, 02:06 PM

All the advice above is good. In the end it all depends on how long that 3.9% offer is good for. Because at the end of the term it may jump to a much higher rate. So, it will only be helpful if you can pay off the entire bill before that term expires.

Another factor is, that your credit score is partly based on the ratio of your monthly balance to the card's credit limit. If you use your credit card to pay off the car loan, your new balance will use up a big chunk of your credit limit, and lower your credit score. Also, you improve your credit by making regular payments on the car loan, and if you pay it off early you will lose that advantage.

Alex3 · 10-31-2007, 02:06 PM

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10-31-2007, 02:06 PM	#1
Exodus Greenhorn Join Date: Dec 2006 Posts: 12 Rep Power: 0	Is it financially sound to pay off an 8% car loan with a 3.9% credit card offer? I often get in the mail checks to borrow money from a credit card for a low interest percentage for the life of the loan. It seems like it might make sense to pay off my car by putting it on a credit card. Is this wise or foolish?<br />

10-31-2007, 02:06 PM	#2
jpgMaster Greenhorn Join Date: Jul 2006 Posts: 33 Rep Power: 6	Is it financially sound to pay off an 8% car loan with a 3.9% credit card offer? It depends on the CC offer. Most of them offer a low transfer interest rate, but READ THE FINE PRINT> it is usually only good for a certain period of time then the rate jumps quite a bit. also if you are late just one time, then the interest rate will jump to near 30% depending upon the credit card company. In the long run, you are better off to stick with an 8% rate because you know it will not change.

10-31-2007, 02:06 PM	#3
hamad Greenhorn Join Date: Jul 2006 Posts: 11 Rep Power: 0	Is it financially sound to pay off an 8% car loan with a 3.9% credit card offer? You may not be able to pay off your car loan with a low interest rate in a year because that's all they offer- A low interest rate 3.9% for one year. However, you can take out the money enough to pay partial of your car loan in one year. For instance, if you owed 15,000 on your car loan, ask the credit card company to deposit 5000 into your checking account at 3.9. use that money to pay your car loan. It seems a bit complicated because you will have 2 payments, one with your car payment and the other with your credit card company. However, instead of paying the whole 15,000 at a higher rate, only 10,000 at 8% and 5000 at 3.9%. If you take the whole 15,000 at 3.99, at the end of the promo, your contract rate maybe higher than 8%, you maynot be able to pay it, you'll end up with a much higher rate. If you have a credit card offers at 3.99 promo and a contract rate less than 8% then I would take the money to pay off the car loan. Because after the promo runs out, it's still beneficial because it's less than 8% Check your contract rate. It's not necessary that you'll pay 22% or higher. If your contract rate is only 13%, that's what you pay when the promo rate runs out. Call the credit card company and ask them. Try to get an offer at 0%. Lots of credit card companies offer that rate. Credit card comapnies are not snakes, If you know how to play the game, you still can come ahead. I use credit card all the time. I borrow money short term and pay it off but not go over my head. I won't get myself in debt. You have to pay close attention when using credit cards. They get people who don't pay attention and don't know how to use credit cards.

10-31-2007, 02:06 PM	#4
Pilot Greenhorn Join Date: Jul 2006 Posts: 8 Rep Power: 0	Is it financially sound to pay off an 8% car loan with a 3.9% credit card offer? uhhh no. Focus on paying off your car loan and don't get another one. Pay cash for what you drive, it is possible. Lets say you do this transaction and you are late by one day, hour, whatever, your % jumps to about 22%, now you are paying more. And that late payment will hurt your credit and you won't be getting anymore low percentage rate deals again. If you are late on your car loan one day your rate won't jump. Just live on beans and rice and pay the thing off. Credit card companies are snakes, avoid them

10-31-2007, 02:06 PM	#5
Alex3 Piggy Bank Join Date: Jul 2006 Posts: 80 Rep Power: 6	Is it financially sound to pay off an 8% car loan with a 3.9% credit card offer? The answer is: It depends. First, closely, closely analyze the offer. To lure potential borrowers, credit cards frequently offer a very low rate that spikes after just a few months. If the company is offering that rate for the life of loan, read that part very carefully, and I'd even go so far as to call the company directly. What other requirements come with the offer? You maybe locked into the card for a period of time or there may be other purchase requirements associated with the offer. Second, how is your current credit? There's no perfect formula for raising your credit score, but generally, secured debt, such as a mortgage or a car loan, is a greater benefit to your credit score than credit card debt. Third, have you any other options to refinance? Depending on how much remains on the car loan, you may be able to get a lower rate from a competing financial institution. How much longer are you going to be paying the loan? Does your current loan have an early payment penalty? This may cost you more than you would potentially save. If, after reviewing these options, it still seems to save you 4.1% on your loan, it may be wise to proceed - but cautiously! Be sure to read all the fine print to make sure you're not surprised by a rate hike that turns 3.9% into 13.9%!

10-31-2007, 02:06 PM	#6
valentina Greenhorn Join Date: Jul 2006 Posts: 7 Rep Power: 0	Is it financially sound to pay off an 8% car loan with a 3.9% credit card offer? Cred card intrest is compounded monthly, car loans are annual. Even if the rate on a card is lower, your paying 3.9 that every month. With the exception of you getting money to pay oit off within a few months, credit cards just keep you on the hook paying for months and even years for something you have bought and repaid back many times over.

10-31-2007, 02:06 PM	#7
Hawa Greenhorn Join Date: Jul 2006 Posts: 29 Rep Power: 6	Is it financially sound to pay off an 8% car loan with a 3.9% credit card offer? All the advice above is good. In the end it all depends on how long that 3.9% offer is good for. Because at the end of the term it may jump to a much higher rate. So, it will only be helpful if you can pay off the entire bill before that term expires. Another factor is, that your credit score is partly based on the ratio of your monthly balance to the card's credit limit. If you use your credit card to pay off the car loan, your new balance will use up a big chunk of your credit limit, and lower your credit score. Also, you improve your credit by making regular payments on the car loan, and if you pay it off early you will lose that advantage.

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