Loan or Credit Card?

Question

I will shortly be purchasing a car and will need a loan of some sort to fund this. Which way is better:

To have a personal loan for £4000 over 2 years at a rate of approx 7.9%

To have a Halifax Credit Card for £4000 with a 12 month 0% on purchases deal and then 13.4% after that expires.

I would hope to of paid off a good chunk of the deal within the first 12 months and the credit card would allow me to pay off as much as I can afford whereas the loan is a fixed monthly amount.

What I was thinking was using the credit card to purchase the car for £4000. For the first 12 months I would pay off £300/month - £3600/year. That would leave £400 at 13.4% which could be paid off easily.

Am i thinking along the right lines ?

Hope you know what I mean, any advice ??

Answer 1

none of the above

Answer 2

You have pretty much answered your own question but what i would do is buy the car on the credit card and pay off as much as you can afford over the next 12 months. Better still, put that money in a savings account and earn interest on it while you are on 0%. If, at the end of the year you just have a few hundred pounds outstanding, pay it over the next few months. Bearing in mind that a loan for a small amount tends to be at a higher rate of interest, possibly more than the APR on your credit card. If you don't have the willpower to pay a credit card off then go for a loan as you know you have to pay a fixed amount each month but it will 100% be paid off in 2 years. Halifax don't take the first payment for 3 months anyway so you will have a little saved up if you want to pay it off early (2 months penalty interest if you do.)

Answer 3

I would look further into your situation. A lot of credit card companies, say no interest for 12 months, but when the 12 months are up they charge the interst from then on as well as the interst from the previous 12 months (if you had not yet paid off the loan). Can you not finance the car when you buy it? Also, when you say that the price is not fixed and you are going to pay 300 on it a month, do you honesty believe that unless it is truly comping out of your account you will pay it? and pay it to that exact amount each month?
Personally, i think the best way (out of those 2) would be the loan. The fixed payment, would ensure you are paying off the car and help you not fall behind. If the payments are not 300, you can still put 300 on it each month(they will always except extra money), which will help you pay off the loan faster. Thus, the interest not having been so much and the car will still be paid off in a year.

**Opinions are like assholes, everybody's got one!!**

Answer 4

Sounds good in theory, however....the credit card is going to still charge for use and the hidden costs are going to get you in the end......if you can afford the monthly payments of 300 then go with the loan and make the 300 a month payments, even if that's higher than the fixed amount, there's usually no penalty for paying early, and this would also increase your credit score....using the credit card just shows a purchase and payments made....and even though there would be about 400 left at the end of 12 months, the interest payments, if monthly payments stayed at 300, would be about 500 more than the loan.....so unless you can payoff the whole thing in 18 months or less, go with the loan as the overall amount will be less, if you can get it all paid off in 18 months go with the credit card....anything longer than 18 months is going to end up doubling your costs.

Answer 5

There's already been some good answers, but if you purchase by CC card next year you might be going to the loan company telling them you want a loan to pay off a credit card which may make you look like somebody who cannot manage money. Whereas if you go to the loan company for the car they will feel much more benevolent towards you.

The other thing is that credit card charges are not fixed, but you could get a fixed loan from a loan company - which makes a further thing to consider - will interest rates go up?

Answer 6

It depends on how well you will stick to paying that amount and not using the credit card for anything else. If you know that in the past you couldn't stick to paying a greater amount than was asked of you don't use the credit card.

You can also pay off the bank loan early. Just add a little more to each payment and the bank puts it directly to the principal.

Just look at yourself and how you handled things in the past and there is your answer.

Answer 7

Definitely a loan, credit card Apr's are way too expensive and you'll pay interest on any other purchases. Go for a loan then you'll know your budget. It's hard to pay off an excessive amount on a creit card and also if you make a late payment you get charged. Trust me - go for the LOAN :) x

Answer 8

Yeah yeah :)

We all know that things never turn out like planned...

So betting that in a year time you will have reach the £3600 mark like mentioned...is very discussable.

Like other mentioned, the credit card got plenty of "hidden charges"...

So, if you really have to borrow money, go for a loan, which will provide you:

- cheaper finance (for sure)
- discipline in your monthly payment

Answer 9

Well here's what I would do, get it for nothing on the credit card, at the end of the time, say at the 11month stage either get a bank loan to pay it off OR get another credit card that gives 0% on all transfers.
They rip you off AMAP (as much as possible) so now go for it.

Answer 10

I think it sounds like a good idea. I think the only down side would be if you couldnt pay 300 one month. Other that that it is definitely a good idea.

Answer 11

Credti Card, but It depends for what it will be used : I found interesting information about your answer & the best credit card options here. http://all-debt-consolidation-loan.blogspot.com/2007/07/chase-credit-cards.html