Can I pay off my car loan this way?
My credit card gives me the option of sending money via internet to pay off bills or as it has one of the options, a loan. Would I be able to pay off my $7,000 car loan with my credit card to get a lower APR that way? My credit limit is $10,000, the Apr is 1.99% for 3 years. Would the bank I have the loan with except the payment. I'm guessing it wouldn't matter seeing as they're getting the money, but i'm just asking hoping someone knows more about it then I know.
- Ryan OngLv 49 years agoFavorite Answer
No, you will instead be turning your car loan into a credit card debt. This would be a poor financial decision, for the following reasons:
The interest rate for credit card debt is always higher than other bank loans, including car loans and housing loans.
Incidentally, I am DEADLY CERTAIN that you have misread MONTHLY interest as YEARLY interest (APR). If your credit card really gives you money at 1.99% APR, your bank may as well throw money on the road. Think about this:
The average time deposit in a bank pays an interest rate of around 3 - 5 % over 3 years. That means everyone would apply for the card, take the money at 1.99%, and then stick the money in a fixed account that grows at 3 - 5 %. They'd earn a PROFIT by SPENDING on the card.
This revolutionary financial move would be front page news by now.
A typical credit card APR is 24% (14 % in America) which translates to 2 % (or 1.16 % in America) PER MONTH, not per year.
Even if you did read it right (which I seriously doubt), and your credit really has such an awesome interest rate, what does it revert to after 3 years? What if after 3 years, your credit card debt ratchets up to the 24 %, and you still owe money on your car?
A car loan is typically 3% per YEAR, as opposed to the credit card's 2 % per MONTH.
Secondly, when you take out a car loan from the bank, you get subsidies. There are legal papers that need to be signed, and you have to buy car insurance. Most banks offer packages that subsidise these costs, and if you use a credit card, you won't have such an advantage.
See the blog below for more details.
- 9 years ago
Since you can access your account online why don't you try it and tell us?
I (guessing) don't think you can pay with the credit card.
But I do think it may be possible to contact your credit card company and do a balance transfer of the $7000 car loan. Although I am doubtful because I have never heard of this (only other credit card balances).
I have a car loan of about half of what you have. It is over a 9 month period. The total interest I am being charged is about 4% and it comes out to about $40 TOTAL over 9 months...
The payments are much higher than if it were a credit card. It forces me to pay equal installments over 9 months vs. a credit card trying to sucker you in to high interest by only paying the minimum...
- sophiebLv 79 years ago
if you'd be able to pay off your $7,000 on the credit card within that 3 years then it sounds ok to me, IF the bank that has that Visa keeps their word. You might want to read your car purchase agreement to see if there is a penalty for paying it off ahead of time.