Transferring Auto Loan To Credit Card

supastar1568

Senior member
Apr 6, 2005
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I only ask because I only owe $2036 on my auto loan.

Would it be possible to transfer this amount to a credit card???
Maybe not? Because its an installment loan as opposed to a revolving loan?
would it be a wise choice?


It would save me roughly 300 dollars.

i have 17 payments of 137.07 left,which equals like 2330.

but on the website of my loan provider, it says i have 2030 left. Which means the extra 300 is coming from interest.

so i would save 300 by transfering it either to my chase card with 0% APR till september 06, or opening a new CC (like the citi dividend) and get 0% on it as oppose to the 7.9% from my auto loan


Would this be a wise financial move?
 

supastar1568

Senior member
Apr 6, 2005
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Originally posted by: DnetMHZ
Balance transfer check from the CC company

yea, Bank of America sends me those each month.

Its 0% untill July then 7.9% after that.

I know it can be risky because one late payment can send my loan interest skyrocketing, but I don't plan on making a late payment.



But I was planning on applying for the Citi Dividend Card just for this loan. Put the auto loan on this card with 0% interest for 12 months (which is roughly the same amount of time I have left on the auto loan but thats with 7.99%)



 

dullard

Elite Member
May 21, 2001
25,033
3,378
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Too many things can go wrong. I wouldn't do it. But if you do choose to do so, here are some things to watch out for:

1) Balance transfer fee may be present. Typically it is a 3% fee. And this fee often is not subject to the 0% interest, you'll likely be paying 20% interest on this fee until the CC is paid off. Thus, be certain to avoid it.

2) Early payment fees. Some car loans have an early payment fee of ~$100. Yours may or may not have it.

3) Expiring 0% deals. That 0% deal until July 2006 won't last you very long. Then suddenly you'll be paying all that interest. It just won't save you much at all in interest.

4) Increasing interest rate. You have to make certain that absolutely nothing goes wrong during the period. No late payments on anything. No underpayments on anything. Etc.

5) Start with a CC with $0 balance and don't use that CC for anything until it is paid off.

6) Lowered credit score. Carrying a balance could potentially hurt your score significantly. That means everything from future loans to car insurance will cost you more.

If you run into any of those 6 problems, you'll likely pay more in the long run. For me, the risk isn't worth it to save a measly fraction of $300. Instead, why don't you just pay a bit more per month on the car loan and save a bundle without much risk (note see #2 before doing this)?
 

Compudork

Senior member
Dec 9, 2002
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Originally posted by: dullard
Too many things can go wrong. I wouldn't do it. But if you do choose to do so, here are some things to watch out for:

6) Lowered credit score. Carrying a balance could potentially hurt your score significantly. That means everything from future loans to car insurance will cost you more.

Not true under many circumstances. Carrying a HIGH balance (as correlates to your credit line) IS bad. But balances alone are VERY good for your credit score assuming you make payments on time and the balance isn't a high percent of your total limit. Banks and lenders want you to carry balances and make payments, this does two things 1) demonstrates that you can responisbly handle your debt 2) shows that you USE the credit you are given. Of course, if you carry a high amount of debt and don't make anything more than minimum payments, it'll hurt you....

But great tips otherwise!!!
 

SurgicalShark

Golden Member
Mar 30, 2004
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Originally posted by: Compudork
Originally posted by: dullard
Too many things can go wrong. I wouldn't do it. But if you do choose to do so, here are some things to watch out for:

6) Lowered credit score. Carrying a balance could potentially hurt your score significantly. That means everything from future loans to car insurance will cost you more.

Not true under many circumstances. Carrying a HIGH balance (as correlates to your credit line) IS bad. But balances alone are VERY good for your credit score assuming you make payments on time and the balance isn't a high percent of your total limit. Banks and lenders want you to carry balances and make payments, this does two things 1) demonstrates that you can responisbly handle your debt 2) shows that you USE the credit you are given. Of course, if you carry a high amount of debt and don't make anything more than minimum payments, it'll hurt you....

But great tips otherwise!!!


Not true. When you are lending money from any financial institution, they see for debt to credit ration, if that ratio is small, you are considered a small risk customer and thus given a good APR.

Whereas, carrying a balance means that your ratio is high and suggests possible problems in future with the new loan. It's a myth that "companies want you to carry a balance." If you have a balance like car installments then paying it off on schedule is what is good not otherwise.
 

Compudork

Senior member
Dec 9, 2002
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Originally posted by: SurgicalShark

Not true. When you are lending money from any financial institution, they see for debt to credit ration, if that ratio is small, you are considered a small risk customer and thus given a good APR.

Whereas, carrying a balance means that your ratio is high and suggests possible problems in future with the new loan. It's a myth that "companies want you to carry a balance." If you have a balance like car installments then paying it off on schedule is what is good not otherwise.

not true? what is not true?

Debt to credit ratio is the second variable considered in credit scoring (and APR is only one of the outcomes derived from this). Carrying a balance DOES NOT mean your ratio is high. Carrying a high balance in respect to your line of credit is. If I have a 10K limit on a card and a $500-1000 balance - is my ratio greater than zero? Of course, but a 5-10% ratio is viewed as anything but high and in the end, if I pay it on-time in a resonable period, it will boost my score in the end, because it demonstrates a positive trend.

The MOST significant factor is your payment history. "Companies want you to carry a balance" is simply a way to point out that when addressing your credit liability and determining credit score, people who occassionally carry balances; but most importantly, consistently made on-time payments, will have better scores than a person who doesn't utilize credit in any form (cards, loans, etc) or otherwise. It's not a literal statment that companies like that you spend money - its that they like that you've shown you can control your finances.

In this case, I would say keep the car loan as is. Pay the loan you originally took out, an installment loan. If you feel better, pay a larger percentage each month, so you will effectively squash the extra interest you pay over time.

 

dullard

Elite Member
May 21, 2001
25,033
3,378
126
Originally posted by: Compudork
6) Lowered credit score. Carrying a balance could potentially hurt your score significantly. That means everything from future loans to car insurance will cost you more.
Not true under many circumstances.
Reread the bolded part.
 

ponyo

Lifer
Feb 14, 2002
19,689
2,811
126
I had 50k line of credit that I maxed out couple years back and it really killed my credit score. I stopped getting good CC junk mail offers and ones I did get was really bad and for people with bad credit. I paid that 50k line of credit off in 2 years and started to get good CC junk mail offers again.
 

Rickten

Golden Member
Apr 17, 2001
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Originally posted by: Compudork
Originally posted by: SurgicalShark

Not true. When you are lending money from any financial institution, they see for debt to credit ration, if that ratio is small, you are considered a small risk customer and thus given a good APR.

Whereas, carrying a balance means that your ratio is high and suggests possible problems in future with the new loan. It's a myth that "companies want you to carry a balance." If you have a balance like car installments then paying it off on schedule is what is good not otherwise.

not true? what is not true?

Debt to credit ratio is the second variable considered in credit scoring (and APR is only one of the outcomes derived from this). Carrying a balance DOES NOT mean your ratio is high. Carrying a high balance in respect to your line of credit is. If I have a 10K limit on a card and a $500-1000 balance - is my ratio greater than zero? Of course, but a 5-10% ratio is viewed as anything but high and in the end, if I pay it on-time in a resonable period, it will boost my score in the end, because it demonstrates a positive trend.

The MOST significant factor is your payment history. "Companies want you to carry a balance" is simply a way to point out that when addressing your credit liability and determining credit score, people who occassionally carry balances; but most importantly, consistently made on-time payments, will have better scores than a person who doesn't utilize credit in any form (cards, loans, etc) or otherwise. It's not a literal statment that companies like that you spend money - its that they like that you've shown you can control your finances.

In this case, I would say keep the car loan as is. Pay the loan you originally took out, an installment loan. If you feel better, pay a larger percentage each month, so you will effectively squash the extra interest you pay over time.


this is complete bs. Using the card and paying it off every month is one thing. Carrying a balance from month to month is a myth and only benefits the credit card company.
 

Compudork

Senior member
Dec 9, 2002
490
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Originally posted by: Rickten
Originally posted by: Compudork

Debt to credit ratio is the second variable considered in credit scoring (and APR is only one of the outcomes derived from this). Carrying a balance DOES NOT mean your ratio is high. Carrying a high balance in respect to your line of credit is. If I have a 10K limit on a card and a $500-1000 balance - is my ratio greater than zero? Of course, but a 5-10% ratio is viewed as anything but high and in the end, if I pay it on-time in a resonable period, it will boost my score in the end, because it demonstrates a positive trend.

The MOST significant factor is your payment history. "Companies want you to carry a balance" is simply a way to point out that when addressing your credit liability and determining credit score, people who occassionally carry balances; but most importantly, consistently made on-time payments, will have better scores than a person who doesn't utilize credit in any form (cards, loans, etc) or otherwise. It's not a literal statment that companies like that you spend money - its that they like that you've shown you can control your finances.

In this case, I would say keep the car loan as is. Pay the loan you originally took out, an installment loan. If you feel better, pay a larger percentage each month, so you will effectively squash the extra interest you pay over time.


this is complete bs. Using the card and paying it off every month is one thing. Carrying a balance from month to month is a myth and only benefits the credit card company.


uhhhh....ok. settle down. first off, do some research, "complete bs" is a gross overstatement. After reading the cc part back, I think I should rephrase. I simply mean to say carrying a balance does not hurt you as long as the debt/credit line ratio is below 20-25% or so. Also, having a more significant payment history on credit cards and installment loans is good. Think of it in these terms, if you take out 5 installment loans over a few years and pay everything on time, it looks better on your report and score as there are more closed account paid in full. The same system can be applied to credit cards. I'm not suggesting that people don't pay their balance in favor of carrying it over if they have the means; simply that is doesn't hurt your score if you pay installments and in many ways can serve to help it. The moral: if you have the money pay it off. If not, it doesn't hurt you. Whether you pay in full the first month, or do it over 5, both will have a positive impact on your score.
 

Rickten

Golden Member
Apr 17, 2001
1,607
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0
Originally posted by: Compudork
Originally posted by: Rickten
Originally posted by: Compudork

Debt to credit ratio is the second variable considered in credit scoring (and APR is only one of the outcomes derived from this). Carrying a balance DOES NOT mean your ratio is high. Carrying a high balance in respect to your line of credit is. If I have a 10K limit on a card and a $500-1000 balance - is my ratio greater than zero? Of course, but a 5-10% ratio is viewed as anything but high and in the end, if I pay it on-time in a resonable period, it will boost my score in the end, because it demonstrates a positive trend.

The MOST significant factor is your payment history. "Companies want you to carry a balance" is simply a way to point out that when addressing your credit liability and determining credit score, people who occassionally carry balances; but most importantly, consistently made on-time payments, will have better scores than a person who doesn't utilize credit in any form (cards, loans, etc) or otherwise. It's not a literal statment that companies like that you spend money - its that they like that you've shown you can control your finances.

In this case, I would say keep the car loan as is. Pay the loan you originally took out, an installment loan. If you feel better, pay a larger percentage each month, so you will effectively squash the extra interest you pay over time.


this is complete bs. Using the card and paying it off every month is one thing. Carrying a balance from month to month is a myth and only benefits the credit card company.


uhhhh....ok. settle down. first off, do some research, "complete bs" is a gross overstatement. After reading the cc part back, I think I should rephrase. I simply mean to say carrying a balance does not hurt you as long as the debt/credit line ratio is below 20-25% or so. Also, having a more significant payment history on credit cards and installment loans is good. Think of it in these terms, if you take out 5 installment loans over a few years and pay everything on time, it looks better on your report and score as there are more closed account paid in full. The same system can be applied to credit cards. I'm not suggesting that people don't pay their balance in favor of carrying it over if they have the means; simply that is doesn't hurt your score if you pay installments and in many ways can serve to help it. The moral: if you have the money pay it off. If not, it doesn't hurt you. Whether you pay in full the first month, or do it over 5, both will have a positive impact on your score.


I will still disagree with you. Having no balance carried over from month to month will yield a better fico. Carrying a balance hurts your score. Simple as that. Doesn't matter if its only 5% of your total credit line.
 

Compudork

Senior member
Dec 9, 2002
490
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76
Originally posted by: Rickten

I will still disagree with you. Having no balance carried over from month to month will yield a better fico. Carrying a balance hurts your score. Simple as that. Doesn't matter if its only 5% of your total credit line.[/quote]

I don't think we necessarily disagree. I agree with what you are saying, but a big myth is that carrying a balance automatically hurts your score. You absolutely DO NOT have to carry a balance to increase your score (my fault if it came out that way - this too is a huge myth). The significant impact on the scoring end coes not from how quickly a debt is paid, but the ratio of credit that one uses. Let me put it this way: Credit Card companies only report the amount you owe, and your total credit limit, and late/missed payments. Its a snapshot basically. If you have a balance of $3000, that is the info that is reported, not whether you pay it off at the end of the month, or carry it over. Like I said, pay it off if you can afford to, but don't assume your score will plummet just because you have to carry a balance for a few months - it still demonstrates your ability to handle debt. Of course, if you leave the same debt sitting there and only pay interest, you are screwing yourself and your score - and I think that is the type of situation everyone is assuming when they call BS on me.

Either way, people rely on credit to damned much. Unfortunately with the state of things today, people are getting more comfortable with debt as time goes on.... but with that said, I think I talk to much and am far too tired to directly articulate my thoughts on the matter. Meh.... :p
 

QED

Diamond Member
Dec 16, 2005
3,428
3
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Originally posted by: Rickten


I will still disagree with you. Having no balance carried over from month to month will yield a better fico. Carrying a balance hurts your score. Simple as that. Doesn't matter if its only 5% of your total credit line.

I've literally seen hundreds of credit score profiles, and I don't believe this is true.

Carrying a very small balance is better than carrying no balance at all. Keep in mind that even if you pay your card off every month the balance reported to the credit bureau will still likely be non-zero.

The FICO system has a way of weeding out the effects of accounts that haven't been used at all, in factoring your credit profile... and for good reason.

Who do you suppose is a better manager of their credit-- someone who doesn't use their credit card at all, or someone who uses it very sparingly?

The credit score is to help a potential creditor evaulate how well you handle credit... not how well you avoid it.



 

Fritzo

Lifer
Jan 3, 2001
41,884
2,124
126
As far as I know, you can't pay a loan with a CC. The only way you can do that is to do a cash advance, which doesn't usually qualify for 0%.

Those balance transfer deals may work- not sure though.
 

toekramp

Diamond Member
Jun 30, 2001
8,426
2
0
my parents have done this before, they were offered 0% on all balance transfers until those balances were paid off as long as they made one purchase a month. they signed up for like a 2 dollar a monoth credit protection thingy and had an interest free car loan :)