Do you have trouble paying your car loan and think that transferring it to your credit card is your best option?
You have found better interest rates and think that doing this will save you money? Let’s start by presenting all the information before making a concrete decision.
The benefits of transferring car loan on a credit card
Generally, this idea could attract you by some major advantages.
“I can benefit from lower interest rates” and “I will fully own, while I make the payment directly to the lender.”
Yes, low interest rates are attractive and it is true that you can benefit. By cons, do not fall into the trap. If you pay a high interest rate for your vehicle, you can really save money by transferring the balance to a 0% card. However, while conditions change normally after 18 months, most advantageous rates are only eligible at the start of your loan. If you transfer your car loan on a 0% card and can not pay it back before the end of the time period when there is no interest, you risk paying an even higher interest rate.
It is also important to note that to qualify for 0% cards, you must have good credit . If you can afford to pay for your car loan during the period when you do not have to pay interest, this option can save you a lot of money!
By using an unsecured loan (your credit card) to pay off a secured loan (your car loan), you will fully own the vehicle and will not risk being taken away if you do not make your payments.
While this may seem like a great benefit, it’s important to note that this will affect your credit rating. By replacing your car loan with a credit card, you risk making a significant change to your credit rating. This could then affect the interest rate of the next loans for which you will apply.
Credit card debt is considered a revolving debt and therefore a risk for companies that evaluate your credit rating. Essentially, a depreciable debt has a much less effect on your credit rating than revolving debt, or credit card debt, because it is usually secured by something. Renewable debt is a greater risk to the lender and has a greater impact on your credit rating.
This is the scenario of “Yes, but no.” If you have a good chance of making your payments on time, and thus benefit from the offers presented by this transfer, it is a risk that could bring you several benefits. If you are tired of finances, and think it will be a quick fix, you should reconsider your idea.
There are many other ways to make sure your car loan is manageable, without getting into debt at the end. Try to make a budget and stick to it. In this way, paying off your debts will be easier. Also, by tracking your expenses, your budget will be more efficient by knowing where your money is going.