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Personal loan to credit card

Discussion in 'Finance & Banking' started by Staggerlee, 21st Jun, 2010.

  1. Staggerlee

    Staggerlee New Member

    Joined:
    21st Jun, 2010
    Posts:
    2
    Location:
    sydney
    Hi,
    I'm not the best at all this stuff so i just have one question.

    I have a loan with a balance of $21000.... which has an interest rate of 15% or thereabouts.

    Could I get a credit card, draw down the $21000 at the higher 20% interest rate, pay off my loan.... then do a balance transfer to another credit card offering 3% transfers for life?

    This makes to much sense. So im assuming i have missed a glaringly obvious reason why this doesn't happen more often.

    Would really appreciate any advice.
    cheers.
     
  2. davo6253

    davo6253 Well-Known Member

    Joined:
    11th Jul, 2008
    Posts:
    74
    Location:
    Melbourne, Victoria
    Yes and no :)

    While its theoretically possible you have to consider the fact that you would have to get approved for a credit card for 21k+ this would need to be done without the loan being paid off. Then in order to pay off your loan via that credit card you would need to do a cash advance which is an instant fee varying from 1-3% :eek: of the amount.

    After that you would then have to apply for another credit card with another institution and also receive a limit of 21k+ and there would be the record of the recent application for the other credit card which in my mind would lower your credit rating as its not a good look to be applying for lots of credit really quickly.

    So imho its not a great idea considering the fact you're going to have to get 2 credit cards approved, pay that cash advance fee and risk getting declined, what if you can't get approved after you've done the cash advance?

    Without knowing more details if you are looking at reducing your interest on your personal loan I would like at refinancing it to another institution perhaps a credit union which generally can offer substantially lower rates.

    Cheers,
    David
     
  3. Staggerlee

    Staggerlee New Member

    Joined:
    21st Jun, 2010
    Posts:
    2
    Location:
    sydney
    Thanks for that, i was thinking itd be trying to get both cards that would be an issue.
    I've got about 15k in shares at the moment anyway which i think i might pull out and just pay down my debt.
    Thanks heaps for your help.
     
  4. Scotto

    Scotto New Member

    Joined:
    8th Aug, 2006
    Posts:
    1
    Location:
    Sydney
    Some institutions only allow a balance transfer from an existing credit or store card but I know Citibank (there may be others) actually allow you to transfer a personal loan balance also. So you would not need to bother opening one credit card to transfer to another.

    The annual fees on some of the good balance transfer rates are quite large but definitely work out better in the long run. Just dont use the card for any other purchases! Cut it up once you receive it.