Financing Auto Loan with 0% Interest Credit Cards

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MoneyTrees
 
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Financing Auto Loan with 0% Interest Credit Cards

Postby MoneyTrees » Sun Aug 23, 2015 7:54 pm

I'm going to take out an auto loan for 15,000 for four years. Decent interest rate of 3.75 %, $337/mo payments. I can easily afford $400/mo.

Now,

If I transferred my debt from the autoloan to an unsecured 0% credit card (best is 21 month via City Simplify) that would remedy the secured auto loan. But what if I transfer to another 0% card at the end of the grace period?

This should hurt your credit score, but if I'm making payments the balance should be reduced. $400 * 21 = 8400 - 15000 = $(6600). A balance that's 56% paid off in less than 2 years should not be a detriment to credit, rather the contrariety. Once the 21 months expire, there is likely to be a 17 month option. $400 * 17 = $6,800, conveniently covering an estimated $190 in transaction fees (38 mo * $5). Car's paid off @ 0 %, saving 1176.50 in interest costs.

Therefore, my questions:

What is the credit to be gained by paying the loan normally vs paying the loan immediately?

Wouldn't a credit card company see the continual payments as a good thing and not dock my credit for switching cards?

What penalties am I risking by the process above?

Thanks in advance!


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Vattené
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Re: Financing Auto Loan with 0% Interest Credit Cards

Postby Vattené » Tue Aug 25, 2015 2:46 pm

Are you sure this is even possible?

I don't think you can transfer the balance of an installment loan to a credit card. Many will let you transfer balances of other major cards, but - as far as I know - none will do this with a car loan.

In theory, you could open a credit card with a long 0% introductory purchase APR, then use that to purchase the car, but many dealerships won't let you use a credit card for a $15,000 purchase (several let you pay part of the purchase with a cap, like $5,000 for example). Also, keep in mind you would have to be approved with a starting limit of $15,000. That may be a trivial thing depending on your credit profile, but it would be your first hurdle.

In practice, you may be able to take out a smaller loan for the car (like $10,000) and use a credit card for as much as they'll allow (say $5,000) as a "down payment" as a way to effectively get a portion of the loan financed at 0%. Your odds of the latter are better.
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Vermonster
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Re: Financing Auto Loan with 0% Interest Credit Cards

Postby Vermonster » Tue Aug 25, 2015 3:47 pm

You can't use a credit card to pay an installment loan. This was the sort of thing that let a lot of people get in financial trouble. Your only option is to put some of it on the card up front. Take the auto loan as is and it will really help your scores. Some banks will also give you a slight discount on the interest rate if you do automatic payments.
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slipper
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Re: Financing Auto Loan with 0% Interest Credit Cards

Postby slipper » Fri Sep 11, 2015 3:15 am

What the other guys said. You can pay a car in full with a credit card so long the dealership allows this (credit card companies have high merchant fees so not all dealerships will allow this), but i don't know of any car loan companies that allow credit card payments. I deal with over 25 different auto loan companies on a regular basis.

rockyrock
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Re: Financing Auto Loan with 0% Interest Credit Cards

Postby rockyrock » Mon Sep 14, 2015 8:53 am

I think it may be possible. Some BT options deposit the funds into an account and let you make the payment.

Chase offers Convenience checks to me all the time and they are good for up to $15k and have a 13 month window at 0%. If the dealer refused to take a convenience check, I could just write it to myself, deposit it and get a cashiers check for the car purchase. After that 13 months, the balance is on a CC and I can BT to another...

If you really want to pay the whole cost of your car on a CC: once you have a firm agreement on what you will pay, ask how much the fee would be to charge the whole cost of the car on your card. They may be willing to do it for a 2%-3% increase in price to cover the merchant fees. This would equate to typical BT fees anyway so not really much of a loss for you if that is the path you are taking.
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Vermonster
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Re: Financing Auto Loan with 0% Interest Credit Cards

Postby Vermonster » Mon Sep 14, 2015 9:38 am

rockyrock wrote:I think it may be possible. Some BT options deposit the funds into an account and let you make the payment.

Chase offers Convenience checks to me all the time and they are good for up to $15k and have a 13 month window at 0%. If the dealer refused to take a convenience check, I could just write it to myself, deposit it and get a cashiers check for the car purchase. After that 13 months, the balance is on a CC and I can BT to another...

If you really want to pay the whole cost of your car on a CC: once you have a firm agreement on what you will pay, ask how much the fee would be to charge the whole cost of the car on your card. They may be willing to do it for a 2%-3% increase in price to cover the merchant fees. This would equate to typical BT fees anyway so not really much of a loss for you if that is the path you are taking.


One would have to read very carefully. Many of those convenience checks come with a percent fee, like 3%. That would wipe any savings or rewards when you are talking about doing multiple BTs. Generally it is better to take a car loan that offers the best interest rate and just pay it off early.
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takeshi
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Re: Financing Auto Loan with 0% Interest Credit Cards

Postby takeshi » Mon Sep 14, 2015 9:40 am

MoneyTrees wrote:If I transferred my debt from the autoloan to an unsecured 0% credit card (best is 21 month via City Simplify) that would remedy the secured auto loan.

Why do you think an auto loan needs to be "remedied"? As indicated above, an installment will help your mix of credit.

MoneyTrees wrote:A balance that's 56% paid off in less than 2 years should not be a detriment to credit, rather the contrariety.

All debts are not necessarily the same. A balance on an installment like an auto loan will hurt less than the utilization on a revolver -- especially depending on what sort credit limit you might be able to get on a card.

MoneyTrees wrote:I can easily afford $400/mo.

Then stick with the auto loan and pay additional on the principal.

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Re: Financing Auto Loan with 0% Interest Credit Cards

Postby rockyrock » Fri Sep 18, 2015 8:32 am

Vermonster wrote:
One would have to read very carefully. Many of those convenience checks come with a percent fee, like 3%. That would wipe any savings or rewards when you are talking about doing multiple BTs. Generally it is better to take a car loan that offers the best interest rate and just pay it off early.



I agree completely and made no suggestion it was a good idea, I was simply pointing out it is possible.
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