We here at Sunny Loans UK understand the challenges that come with paying off a personal loan. That’s why we’re here to help you understand whether it’s possible to use a credit card to reduce your costs.
The main challenge of paying off a loan with a credit card is understanding the type of credit card you should use, and any potential issues that come with it. That’s where we will come in to help, and we’ll help you determine whether a credit card is the best repayment method for you.
Can You Pay Off Your Loan With A Credit Card?
Credit cards are a great option to manage debt, especially if you use it for one particular purpose. While many people may get a loan to pay off a high interest credit card, you can also use a credit card to pay off your loan and reduce your borrowing costs. The best way to do this is by getting a credit card with a 0% interest introductory period.
By choosing a 0% interest credit card, you can reduce your borrowing costs to that same percentage. This way, you can repay your full balance in less time. However, you will need to have a good credit score to find the best cards.
We should advise you that if you borrow to pay off a personal loan, then there are risks that come with it. While a credit card can help you control your debt and save money on the way, you also need to pay attention to the terms and conditions. We recommend you always check any hidden charges and fees to help you.
Paying Off Your Loan With A Credit Card: What You Need To Know
Before you begin to pay off your loan, there are a few things you need to know first. You need to have a money transfer card to ensure you can pay off your loan, but first, we recommend you do your research.
Transfer Fees
Credit cards with a balance or money transfer usually charge a fee, which is often charged at 3% of the amount you transfer. We understand how costly this can be, especially if you transfer a large amount over.
Before you begin the transfer, you should check that the amount you want to save is more than how much you transfer. If you need to pay more, then paying off your loan with a credit card will not be worthwhile.
Early Repayment Charges
Personal loans come with early repayment fees to offset the amount of interest the bank will lose when you pay it off. If the repayment fee is expensive, then you may lose money depending on how much you need to pay.
Promotional Periods
Most credit cards will only charge 0% interest for a certain period, so you need to know how long this promotional period is. We recommend you pay off the balance you will use within the promotional period, or you may face some additional costs.
Don’t Make Additional Purchases
We recommend that if you use a credit card to pay off your loan, then you should avoid making other purchases on the card. The interest most likely won’t apply to new purchases, so instead, you should only use it for your intended purpose.
Money Transfer Credit Cards
We at Sunny Loans UK recommend that you apply for a card that offers money transfers. Don’t confuse this with a balance transfer card, which will move the balance from your credit card to a new one. A money transfer credit card will let you move funds from your credit card into your bank account.
Once you’ve been approved, we suggest you pay your personal loan as soon as possible. You can then move your money into your bank account to pay off the full amount. Before you do this, we suggest that you double check the transfer fee to ensure you’re not paying more than if you paid your loan normally.
Then you will be able to set up a direct debit to pay off your monthly payments on your credit card. Should you miss a payment, you will be charged a higher interest rate, and you may lose your promotional interest.
How To Pay Off Your Loan With Your Credit Card
Paying off your loan with a credit card is a relatively simple process, especially when done correctly.
First, we recommend that you get an early settlement figure for your loan. This will include everything you need to pay, and any early repayment charges.
Next, check that you will save money by transferring money from your credit card to pay your loan. Keep in mind the transfer fee, as this will be at least 3% of the full amount you need to transfer.
Compare each money transfer credit card and ensure you’re eligible before you apply for your credit card. We don’t suggest you apply for multiple cards at once as this can harm your credit score.
When you’ve chosen the right credit card for you, transfer the funds you need into your bank account so that you can settle your personal loan. It’s essential that you confirm that the balance has been settled in full with your loan provider.
Finally, you are left without a loan, and if you’re in the 0% promotional period, you can pay off the balance on your credit card. We recommend that you pay the full amount before the end of this period, or you may end up with high interest rates that will cost you more.
Final Thoughts
We here at Sunny Loans UK understand that paying off a loan can be stressful. However, it doesn’t have to be. With the right advice, we believe that anyone can pay off their loans with the correct tools. With our help, we hope that you won’t have any difficulties paying off your loans with the correct credit card with all the right information.