Loan advice

[chazza]

I borrowed a sum of money from a family member on the understanding I would pay it back monthly but unfortunately circumstances have changed and they need the money back asap. I don't want to take a loan out for the money as it is a small amount (about £1500 is outstanding) and the APR is high.

Is it possible to get a credit card at 0% for the first year and max it out so that I can repay the full amount to the relative, and pay this off monthly instead? Hopefully I could do it within a year but if anything bad happened could I switch to another 0% for a year card?

I don’t hold a credit card or any loans so don't know much about these things so not sure if this is possible or not? Or would there be a better way of solving the problem that I haven't thought of?

[R1Geezer]

yes you can get 0% card possibly for a year, maybe 9 months. They would charge around 3% For the transfer, just go for the balance transfer when you open the account and give them the sort code and account of the account where you want it to go. Don't use the card again though, in cut it up don't use it at all after the transfer has been done.

[chazza]

Thanks, I was able to find one that offered the 0% for 16 months so have gone with that in the end!

[Hymie]

To make money on such 0% credit cards – there is a catch, by which the uninformed end up paying 20%+ for using the card.

Once you have the loan amount on the card – make sure you pay off the minimum amount each month (best to set up a direct debit, so you never forget) – once in default, you will loose the 0% and be charged the standard rate for the card.

Second, throw the card in the back of a drawer and never use it for any purchases. Otherwise the terms of the card are such that you will pay off the 0% loan first, while accruing charges on your spending at 20%+, which will only get paid off once you clear the 0% loan.

[chazza]

As soon as I transfer the money over, i am going to set up a direct debit for the amount divided by 15 months so that I can pay it off in full before I have to pay any interest.

Unfortunately I will have to pay 4% to transfer the money over in the first place, but I think that is the lesser of two evils

[Hymie]

No, you should not pay off the total amount in 15 equal instalments. But pay back the minimum required by the credit card company (over paying the required card amount will gain you nothing, since it is an interest free loan). Any remaining money from the 15 equal amounts should be placed in a savings account (earning you interest). At the end of the interest free period, pay off the card amount in full and collect the interest from the savings account. Having said that, given the current interest rates available to savers, you will only make £20 - £30 on the deal.

[chazza]

Thank you for your advice but for the sake of £20-30 I would rather just pay it back as I can, in monthly installments

[Postdog]

Dunno for certain but money from a credit card is not treated the same way as goods with most lenders. Maybe goods are interest free, but money not - you really need to check before you do anything.