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Loan to clear credit card

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  • 03-03-2009 2:11pm
    #1
    dlambirl
    Registered Users Posts: 2,062 ✭✭✭


    Hi,

    Just looking for peoples opinion on a situated.

    X has a credit card and Y (his partner) also has a credit card and the two cards total to almost €1400. Y is out of work and cant afford to pay back any so X is paying €25.00 off each card each week.

    Would it be better for X to take out a loan for €1400 and clear the credit cards and repay (say AIB) €124 per month?

    Which would make more sense?


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    #2
    GerardKeating
    Registered Users Posts: 7,650 ✭✭✭GerardKeating


    dlambirl wrote: »
    Hi,

    Just looking for peoples opinion on a situated.

    X has a credit card and Y (his partner) also has a credit card and the two cards total to almost €1400. Y is out of work and cant afford to pay back any so X is paying €25.00 off each card each week.

    Would it be better for X to take out a loan for €1400 and clear the credit cards and repay (say AIB) €124 per month?

    Which would make more sense?

    Also without exception, the interest on a loan is lower than a CC, so the loan (assuming you can get one) is the best option.

    But if you miss a payment it can be a recorded in ICB, whereas not with a credit card..


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    #3
    SeanW
    Registered Users Posts: 8,825 ✭✭✭SeanW


    Assuming that Xs job is safe and has de-facto taken responsibility for both cards, then yes a loan would be advisable, as it will take more than 7 months to clear both cards. Credit Card interest rates are generally higher than that of a loan, so assuming X can get a loan, he will be able to either pay the whole thing off faster, or pay less per month.

    I've seen credit cards offering rates as low as 14.9% but many are as high as 18.9 or 19.9%. Cash advance portions of the balance (depending on the card) can go over 20.
    By contrast, one generally should not pay more than 10% for a loan, and possibly much less.


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    #4
    Sizzler
    Registered Users Posts: 5,430 ✭✭✭Sizzler


    Why not just transfer the balance to MBNA? Interest free for 10 months and the €25 a week (€100 a month) is more than enough to meet the minimum payment. 10 months interest free is better than a years loan with a bank or a credit union.


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    #5
    stepbar
    Closed Accounts Posts: 6,123 ✭✭✭stepbar


    Sizzler wrote: »
    Why not just transfer the balance to MBNA? Interest free for 10 months and the €25 a week (€100 a month) is more than enough to meet the minimum payment. 10 months interest free is better than a years loan with a bank or a credit union.

    In the current environment I doubt many credit card companies are taking debt on from other institutions.

    A loan would be best but practically useless unless you commit to cutting up 1 or both of the cards. Otherwise you fall into the same debt trap again.


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    #6
    branners69
    Registered Users Posts: 2,699 ✭✭✭branners69


    Sizzler wrote: »
    Why not just transfer the balance to MBNA? Interest free for 10 months and the €25 a week (€100 a month) is more than enough to meet the minimum payment. 10 months interest free is better than a years loan with a bank or a credit union.

    Just something to be aware of, in order to qualify for the interest free offer you must pay off the balance you transfer onto the card within the 10 months or else you pay all interest due!

    It is in the small print!


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    #7
    GerardKeating
    Registered Users Posts: 7,650 ✭✭✭GerardKeating


    Sizzler wrote: »
    Why not just transfer the balance to MBNA? Interest free for 10 months and the €25 a week (€100 a month) is more than enough to meet the minimum payment. 10 months interest free is better than a years loan with a bank or a credit union.

    Unless the OP already has an mbna card...


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    #8
    Sizzler
    Registered Users Posts: 5,430 ✭✭✭Sizzler


    stepbar wrote: »
    In the current environment I doubt many credit card companies are taking debt on from other institutions.

    A loan would be best but practically useless unless you commit to cutting up 1 or both of the cards. Otherwise you fall into the same debt trap again.
    Not so, Ive just transferred a sizeable balance to MBNA with no problem whatsoever, they didnt even blink. I actually thought it would be a problem in the current environment.
    branners69 wrote: »
    Just something to be aware of, in order to qualify for the interest free offer you must pay off the balance you transfer onto the card within the 10 months or else you pay all interest due!

    It is in the small print!
    :rolleyes: That was implied friend.

    The OP said they have 2 cards, each one at €700, might as well transfer the balance over and pay the 100e a month. Even at €50 a month by my maths the balance remaining at the end of the 2 months would be €200. Yes they would charge interest but you cant tell me the interest on €200 for a few months on a reducing balance basis would be cheaper than a loan for €700/1400 over a 12 month period.


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    #9
    branners69
    Registered Users Posts: 2,699 ✭✭✭branners69


    Sizzler wrote: »
    :rolleyes: That was implied friend.

    Not very clearly!!

    Read the small print you pay the interest on the full 10 months not just on the outstanding balance :rolleyes::rolleyes::rolleyes:

    If OP has €1400 on the card and pays €1000 (€100 x 10) he still has a balance of €200 but he wont meet the terms of the interest free offer and will pay all interest owed!!!

    So the OP would be much better off with a Credit Union loan or similar rather then the rates credit card companies charge! And if you are going to suggest a credit card why not suggest the one with the lowest rates which is Halifax!!!


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    #10
    Sizzler
    Registered Users Posts: 5,430 ✭✭✭Sizzler


    branners69 wrote: »
    Not very clearly!!

    Read the small print you pay the interest on the full 10 months not just on the outstanding balance :rolleyes::rolleyes::rolleyes:

    If OP has €1400 on the card and pays €1000 (€100 x 10) he still has a balance of €200 but he wont meet the terms of the interest free offer and will pay all interest owed!!!

    So the OP would be much better off with a Credit Union loan or similar rather then the rates credit card companies charge! And if you are going to suggest a credit card why not suggest the one with the lowest rates which is Halifax!!!
    News to me on the interest being applied on the TOTAL and not the remaining :eek: Thanks for that !

    As for the lowest rate, Halifax are a nightmare to deal with, have you tried them? I applied last year and they lost originals of my bank statements / utility bills and copies of my driving license and passport...twice ! You get put through to some call centre in the south of england which frankly dont have a clue !

    I'll stick with MBNA for the 10 months and pay them the minimum for the 9 months and then clear the balance in the 10th, free loan is the way I looked at it :) At least they have a call centre in Ireland and are reasonably efficient.

    You might well be right for the OP on the credit union loan, easier to manage and can roll up the 2 amounts into one and cancel the cards etc.


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    #11
    branners69
    Registered Users Posts: 2,699 ✭✭✭branners69


    Sizzler wrote: »
    News to me on the interest being applied on the TOTAL and not the remaining :eek: Thanks for that !

    It is news to most people til they take the hit!!!

    I had a Halifax card cos their offer is much better than MBNA's as in they offer 0% on balance AND purchases for 6 months. For the love of God dont buy anything on your MBNA card as your purchases are not interest free! As far as I am aware any repayment you make goes towards your recent purchases and not the balance transfer!

    Once used correctly, as you say, these are interst free loans but you just got to know the ins and outs so as not to get stung!!!
    Sizzler wrote: »
    You might well be right for the OP on the credit union loan...

    To me the CU loan is the best option as the CU charge on the outstanding balance less any repayments. So if the opening loan is €1400 and they pay off €100 per month within 6 months the interest being charged is on €800 and not the original €1400. If you get a Personal loan from the bank the interest charged after 6 months is still on the full opening balance of €1400!

    But unless you have being saving with a CU it can be difficult enough to get a loan from them!


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    #12
    apricot
    Closed Accounts Posts: 6 ✭apricot


    GerardKeating wrote: »
    Also without exception, the interest on a loan is lower than a CC, so the loan (assuming you can get one) is the best option.

    But if you miss a payment it can be a recorded in ICB, whereas not with a credit card..

    credit card payments are recorded on the irish credit bureau (ICB)


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    #13
    dlambirl
    Registered Users Posts: 2,062 ✭✭✭dlambirl


    apricot wrote: »
    credit card payments are recorded on the irish credit bureau (ICB)

    What does that mean??


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    #14
    stepbar
    Closed Accounts Posts: 6,123 ✭✭✭stepbar


    dlambirl wrote: »
    What does that mean??

    It means that if you start to miss repayments it's recorded on the ICB. This could affect your future ability to borrow money.


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    #15
    stepbar
    Closed Accounts Posts: 6,123 ✭✭✭stepbar


    Sizzler wrote: »
    Not so, Ive just transferred a sizeable balance to MBNA with no problem whatsoever, they didnt even blink. I actually thought it would be a problem in the current environment.

    The Ulster Bank have stopped offering 0% balance transfers and I suspect that others will follow over the coming months. As for MBNA.... well they'd give my granny a credit card if they thought they'd get away with it. MBNA don't exactly have great lending standards TBH.


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    #16
    FibbersON
    Closed Accounts Posts: 66 ✭✭FibbersON


    Get onto MABS, grab a standard letter, asking for fees and interest to be suspended on the account, you are willing to pay back the debt but your circumstances have changed, they'll gladly accept some money rather than none.


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    #17
    FibbersON
    Closed Accounts Posts: 66 ✭✭FibbersON


    dlambirl wrote: »
    What does that mean??


    The ICB is a list of your loans, and records your payment history for 24 months, so if you have missed a payment on your mortgage in 2005, that is not on your ICB report, if you missed one in Jan 08, it's still there, til Feb 2010. At the end of any loan your last 24 months of payments become frozen, don't change, so miss a payment at the end could look bad. 5 years after the debt is cleared the whole thing is wiped off.


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    #18
    dlambirl
    Registered Users Posts: 2,062 ✭✭✭dlambirl


    stepbar wrote: »
    The Ulster Bank have stopped offering 0% balance transfers and I suspect that others will follow over the coming months. As for MBNA.... well they'd give my granny a credit card if they thought they'd get away with it. MBNA don't exactly have great lending standards TBH.

    My grandad got a letter from MBNA offering him a credit card there during the summer..............

    My grandad is dead over 5 years....

    They'll even offer credit to the dead!!


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