Can a math wizard help me with this? If I used a credit card with a fixed APR of say 5%, would it cost me the same over the same lenght of time if i were to take out a loan with a bank for the same amount of money at the same 5% interest rate.
So lets say I take out a bank loan on a car and pay 250.00 a month for 36 months at X% interest rate,i would pay the bank $9000.
What if I used my credit card which offered the same X% interest rate for a promotional period of 36 months. I would pay the credit card $250 a month for 36 months. My question is does that pay off the loan just as the bank loan would have, or is the interest calculated different.
2006-12-02 09:32:18 · 10 answers · asked by dittmer007 3 in Business & Finance ➔ Personal Finance
you have to look at the terms of the loans. Often the interest on car loans are compunded monthly. read the fine print on your credit card's terms of services. i have seen cards where the interest is compounded daily. this will result in significantly higher costs over the life of your loan.
additionally, if the amount you are borrowing is a large percentage of your credit limit, it will hurt your credit score if you carry that sort of balance on your credit card for extended periods of time. a car loan will not hurt your score as much as a credit card balance would.
2006-12-02 09:35:46 · answer #1 · answered by QuickQuestion 3 · 1⤊ 1⤋
I woud think since they are both 5% it should be the same. However I would suggest you do the bank loan because on your credit report a $20,000 car loan from a bank is looked upon more favorably than a $20,000 credit card loan. Although if you have good credit, you can apply for a no interest loan or get a very low balance transfer rate and beat the bank.
Also remember that on most credit cards unless the car is the only thing on the car, you may end up having to pay a lot more. For example say you have a 5% interest on the $20,000 car purchase. And then you go and buy something for $1000 on the same card but the interest went up to 10%. When you mail in your payments, that $1000 with the nigher interest will be paid off last, there by causing you some major money problems.
2006-12-02 09:41:43 · answer #2 · answered by tofu 5 · 0⤊ 0⤋
The only factor between the two loans, given the same interest rate, is the method of calculating interest. If interest is calculated monthly, the loan will cost less than if it is calculated daily. You need to look at the terms of the bank vs. the card. If both are calculated the same, both will cost you the same. Also, you need to look at the cost for being late with a payment. Credit cards tend to charge a high late fee. Also, if you are late on a card when you are utilizing a promotional rate, you are very likely to have that promotional rate rescinded. So, if there is any possibility that you will not be able to meet ALL the terms of the promotional rate on the card, you are better off with a bank loan.
Hope this helps. :)
2006-12-02 09:38:57 · answer #3 · answered by altosaxjazz 2 · 0⤊ 0⤋
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2016-09-26 06:16:58 · answer #4 · answered by ? 3 · 0⤊ 0⤋
I doubt your credit card has a 5% apr. If it does, then it is a promotional rate that will zoom up if you ever miss a payment or are late.
If you own a house, an equity loan might be good, because you can write off the interest on your taxes.
Secure the loan from the bank before you make the deal for the car, it gives you leverage when negoitiating the price of the car.
A dealer loan will can be 0% Apr but they wont give up anything on the price.
Just late once with the card will send your apr up to like 17-29%
Be careful
2006-12-02 09:40:01 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Credit Cards usually have a 18% interest or higher... at least any I've ever heard of!
If you can get a credit card for 5% and a bank loan for the same, then really, it amounts to the same thing doesn't it?
Just make sure that there are no additional yearly fees tied into your credit card.
I hate credit cards ... they are evil... I'd always go with a bank, or Credit Union if possible (lesser of evils)
2006-12-02 09:36:52 · answer #6 · answered by lottaqs 1 · 0⤊ 0⤋
it is calculated the same, however consider the financing rebates and by downs from the dealership before deciding on which finance option to go with
2006-12-02 09:35:28 · answer #7 · answered by Fearless6968 2 · 0⤊ 0⤋
Go with the one with the lowest interest.
2006-12-02 09:33:32 · answer #8 · answered by Webballs 6 · 0⤊ 0⤋
It's all on credit, and that's the main factor here.
Pay cash, and you don't have to worry about this. =]
2006-12-02 09:34:36 · answer #9 · answered by =] -- * 3 · 0⤊ 0⤋
Buy yourself a rolex instead.
2006-12-02 09:37:42 · answer #10 · answered by cancerman 3 · 0⤊ 1⤋