Need advice on finance option.

jarvis

Hi

I'm about to buy a car and need finance of €7000 to complete the purchase.

I have looked online at the various bank's interest rates and they all seem a little high. 11.46% being the cheapest.

My dilemma is this.

I have an MBNA credit card with little or no outstanding balance and a €15K limit. The interest rate on this is 10.9%
They are offering 0% interest on cash transfers till Jan 2011, then it will revert to 10.9%

Is this the best way to go as it's lower interest rate, I will have more powerful bargaining with cash and the repayments will be very flexible.

I plan to set a DD each month to clear it over 5 years.

Anyone any suggestions as the best way to go?

Anyone know how to work out the total amount repayable/cost of interest?

Anyone completely against doing this? and why?

Thanks in advance.

chris85

jarvis wrote: »

Hi

I'm about to buy a car and need finance of €7000 to complete the purchase.

I have looked online at the various bank's interest rates and they all seem a little high. 11.46% being the cheapest.

My dilemma is this.

I have an MBNA credit card with little or no outstanding balance and a €15K limit. The interest rate on this is 10.9%
They are offering 0% interest on cash transfers till Jan 2011, then it will revert to 10.9%

Is this the best way to go as it's lower interest rate, I will have more powerful bargaining with cash and the repayments will be very flexible.

I plan to set a DD each month to clear it over 5 years.

Anyone any suggestions as the best way to go?

Anyone know how to work out the total amount repayable/cost of interest?

Anyone completely against doing this? and why?

Thanks in advance.

you are assuming the interest rate for the card will remain constant. MBNA may up their interest rate, most likely will going by the actions of other banks upping their CC rates.

Your finance agreement would be at a fixed rate.

jarvis

chris85 wrote: »

you are assuming the interest rate for the card will remain constant. MBNA may up their interest rate, most likely will going by the actions of other banks upping their CC rates.

Your finance agreement would be at a fixed rate.

I understand that Chris, they tried to up my rate before and I told them I'd switch providers and they kept it at 10.9%
I could possibly switch providers anyway when the 0% is up. I could also switch to a personal loan if I was unsuccessful at convincing them to leave me on 10.9% in the event of them upping my interest.

I am with them 8 or 9 years and never missed a payment and had varying degrees of debt on the card. They always seem keen to keep me.

chris85

why not just get a personal loan? lower rate and not secured on car.

jarvis

chris85 wrote: »

why not just get a personal loan? lower rate and not secured on car.

The loan rates I quoted above are for personl loans and neither option would be secured on the car! Therefore CC is cheaper!

dotsman

jarvis wrote: »

I could possibly switch providers anyway when the 0% is up. I could also switch to a personal loan if I was unsuccessful at convincing them to leave me on 10.9% in the event of them upping my interest.

The problem with this, that you need to be aware of, is that you might find it difficult to find another institute to either transfer your card to or give you a loan with such a large outstanding balance on your card.

It is very likely that the interest rates on your credit card will greatly exceed the cost of a loan over the long term. Likewise, should you run into any difficulties (lose your job, illness/accident, pay cut, tax hike etc) the penalty interest on the card would be much higher than on a loan.

For that reason, I would strongly recommend against this. Remember, credit cards are payment tools (that, as a bonus, allow for short term debt to cover cash-flow issues), not for medium/long-term borrowing.