As the weather warms up and beach holidays are being planned, the desire to lower your car’s top becomes overwhelming. You don’t actually own a convertible, though. The bad news is that. the positive news The season for buying cars is about to start, and a ragtop might well end up on your list of possibilities.
If your credit is excellent, finding a car loan with an interest rate around 5% won’t be difficult. On some makes and models, some captive car lenders are offering rates as low as 0%. Your credit card is another source of free money for a vehicle loan if a captive auto lender cannot provide you 0%.
That’s accurate. You may be able to transfer the remaining balance on your auto loan to your credit card with some credit card companies. Additionally, if your credit is strong enough, you could benefit from the finest credit card offer available right now, which is free money in the form of a 0% introductory interest rate. However, is it wise to move vehicle loan debt to a credit card?
Payment Towards Revolving
If you’ve done your research on credit scores, you know that revolving debt is significantly more likely to indicate higher credit risk than installment debt does. Translation? Revolving debt is more detrimental to your credit ratings than installment debt. When you transfer a balance from an auto loan to a credit card, you immediately change the nature of the debt from almost benign installment to potentially risky revolving.
Furthermore, you can have a credit card that is heavily leveraged if you put a sizable amount of auto loan debt to it. Keep in mind that the link between your credit card balances and your credit card limitations is one of the most crucial aspects of your credit scores. Your credit scores will suffer if you charge a $10,000 vehicle loan to a credit card with a $10,000 credit limit because you now have a 100% “used” credit card on your record.
Credit cards with zero percent interest are excellent, but the interest-free period is often just 18 months long, and even that is on the generous side. Many no-interest periods are short-lived and end quickly. When the interest-free period on the card expires, interest will start accruing if you haven’t paid it off. And a credit card’s interest rate typically ranges between 15% and 20%. In fact, compared to when the debt was a credit card, you’ll probably be paying a lot more interest on your auto loan debt.
Additionally, a balance transfer fee can be demanded of you. Although they can vary from card issuer to card issuer, balance transfer fees are typically approximately 3%. If you’re thinking of consolidating your auto loan debt onto a credit card, assess the cost of doing so in relation to your savings and whether the trade-off is still in your favor. This is particularly true if your loan is almost paid off and there is little interest left to pay.
However, there is a case to be made that by transferring your auto loan obligation to a credit card, you virtually eliminate the risk of having your automobile repossessed in the event that you get into financial trouble. That appears to be a possibly costly quasi-insurance policy against repossession. Additionally, since the issuers of no-interest credit cards want spotless credit scores, it’s doubtful that you’ll be approved for one if your credit reports already reflect signs of financial difficulty.