Suggestions for Low Rate $10k Loan

Steve-o on 23/06/2017 - 07:25

Hi guys,

I'm looking for suggestions on a low interest loan to replace my current car loan.

I bought a used car about 1.5 years ago on a $15k unsecured loan. I was new to the country, was still in my probation period at work and didn't have assets so went ahead with a 15.99% interest rate. My strategy was to aggressively pay the loan off and look at a loan later down the line to replace that one.

I've knocked it down to about $10k now and I'm looking to jump ship. There will be an early repayment penalty but last time I worked it out it was still worth it.

Financial

Comments

  • altomic on 23/06/2017 - 09:04
    +5

    Apply for a CC with a $10k limit. Pay off loan with CC. Apply for a second CC with an interest free balance transfer.

    • tio on 23/06/2017 - 09:16
      +2

      This, Balance Transfer is the name of the game. Happy hunting.

    • JIMB0 on 23/06/2017 - 09:38

      I understand the balance transfer part, but I didn't know you could pay a loan with a credit card. Would you get points on the payment?

      • tio on 23/06/2017 - 09:46

        mostly unlikely as I would suspect that would be treated as cash advance coming out of a credit card. Not only you don't normally get pts for cash advance, you'll charged CA interest rate straight away, and will lose your interest free period.

        I believe the financial system is set up so that you can't pay loan/credit with credit without incurring fees, except for BT workaround.

    • tio on 23/06/2017 - 09:42
      +6

      Just to add more on @altomic's comment, if you can organise it, these would be the ideal steps:

      1 - Apply for the CC1 with the 10k any limit, but don't use it
      2 - Apply for CC2 with 10k balance transfer (bt) for 0% for X months to CC1
      3 - When the bt shows up in CC1, contact bank to ask to transfer that extra balance to your bank account.

      Doing that you won't incur cash advance interest on CC1.

      An alternative approach would be to see if are elligible for a Citibank CC that offers 0% for 6mths. Then you skip step 1 above, and just ask for a cheque to self when organise BT. It's not publicly available but it's still an option with Citibank.

      Tio out.

      Edit: 10K limit on CC1 is not absolute requirement

      • Easton on 26/06/2017 - 09:00

        I did this. I had two cards with a zero balance (ANZ and Westpac). I did a 0% BT to ANZ, putting the ANZ card into a positive balance and then just used Internet banking to transfer it to my savings account. I had zero fees/interest charged.

        Make sure the transfer clears before you transfer it out though – otherwise you'll be charged a cash advance fee.

      • Steve-o on 29/06/2017 - 07:40

        Thanks to altomic and tio. I'm a credit card noob so this is my first time looking at BTs and the like.

        So you use cc1 purely as the middle man to move the money from cc2 to your actual bank account. Getting a really good cc2 is the main thing.
        My wife has a credit card and we have a joint bank account, could I just use hers as the middle man?

        If not, do you guys think applying for 2 credit cards will throw up any red flags? I don't currently have one and my 2 year phone contract ends in a couple weeks so don't have much on my credit record.

        • tio on 29/06/2017 - 09:52
          +1

          It really depends on your financial situation. At the moment, I have 8 active credit cards and 21 credit enquiries on my credit file.

          If you earn above minimum wage, work full time and have average spending, I don't think applying for 2 cards in a short time frame will cause any issue.

          You can by all means try and use your wife's card, but I believe technically, the BT should go to another card under your name.

        • Steve-o on 30/06/2017 - 07:40

          @tio:
          Ok I'll be able to get 2 cc's no problem. I had a look around and I think this is the best two I can get at the moment:

          CC1: Coles platinum no annual fee mastercard
          - no annual fees
          - $100 coles gift card

          CC2: Westpac Low Rate credit card
          - $59 annual fee
          - 0% p.a. for 24 months on balance transfers (2% fee)

          Now I'm happy to cop the 2% fee which will be +-$200 because of the $100 coles gift card will offset half of it.
          What is your guys opinions on the cards?

        • tio on 30/06/2017 - 10:37

          @Steve-o: well, really your out lay would be 2% fee + 2 year card fee - $100 gift card = approx $220 for a 2 yr loan with no interest.

          The only catch is, you won't know what credit limit Westpac will give you. Also you can only ask for 95% of the credit limit for BT. The min limit on the WP card is $1000 (as per information from Finder.com.au). To get $10k BT on the WP card, you'll need to have a credit limit of at least $10527, so there's a risk you may not getting the full 10k you'd want.

          If you are happy with that, then go for it. Otherwise, I'll say look for a card that have higher min limit so that you'll know at least how much is available for BT.

    • GangGang on 23/06/2017 - 10:07

      This would be great to do if it can be done. Citibank have 2 years free with a one off 1.5% fee only at the start. When the 2 years is up, transfer again.

    • Slippery Fish on 29/06/2017 - 07:43

      They generally will not give 100℅ of the payout amount, so you might be left with 1-2k on the old cc. (Or so a news program I saw once said)

  • chumlee on 23/06/2017 - 09:38
    +1

    Try peer to peer lending like ratesetter

  • 2jzzzz on 23/06/2017 - 10:14

    Citibank credit card cheque to self, or their interest free balance transfer for 2 years.

    • Ash-Say on 23/06/2017 - 10:59

      1.5 balance transfer fee applies.

      • Steptoe on 23/06/2017 - 22:26

        So over 90% off what OP paying now 💰

  • tio on 23/06/2017 - 10:32
    +1

    just another 2c, I've got a lot of coins in me man purse.

    OP, best case scenario is you are able to find a fee free (or first year fee waived) CC with 0% BT for X months with no fee associated that you can apply for. Then you practically get a free loan.

    Some less than ideal scenarios are when you are charged fees for: BT request, CC annual fee, some even ask for BT monthly maintenance fee. If you can't find an ideal solution, you'll just have to work out which lesser solution will be best for you.

  • blonky on 23/06/2017 - 11:32

    Citibank Ready Credit (personal line of credit) - 9.99% interest for first 2 years, if you can't find a good BT offer

    With your early repayment penalty, I've a friend pay all but $10 of the balance, then call the lender and ask what the repayment penalty would be - lender would say 6% of the remaining balance which is 6% * $10 = $0.60. Paid 60c and loan cleared. Don't quote me on this as I imagine financing companies aren't stupid but could be worth trying for the sake of it

  • redfox1200 on 23/06/2017 - 14:02

    +1 for citibank balance transfer with check to self, currently have a 60k balance transfer for 18 months at 0% sitting in my home loan.

    • gummibears on 23/06/2017 - 18:32

      Is this a common practice? Sounds interesting.

    • Ash-Say on 24/06/2017 - 04:18

      How you managed to get such a high limit?

  • malich on 23/06/2017 - 14:10
    -1

    You'll struggle to get an unsecured loan with a rate low enough to justify the switching costs.

    Bear in mind, there will be establishment fees associated with the new loan in addition to any termination charges on the existing loan.

    Current loan @ 15.99% over 2 years - $490 per month. Total amount payable - $11,750.

    Proposed loan @ 10% over 2 years - $461 per month. Total amount payable - $11,075.

    So you would need to have switching costs less than $675 to make it worth your while. Once you take out establishment fees + termination fees + time costs, is it worth it? Consider that paying the loan off quicker than 2 years would further reduce the benefit of switching.

    Frankly (coming from somebody who works in consumer credit), you're doing well getting a loan at an interest rate of 15.99% if you're new to the country. In your position I would continue your strategy of paying the loan you have off quickly.

  • Steve-o on 11/01/2018 - 08:53

    Hey guys, circling back to this. I ended up doing the credit card balance transfer method and I calculated that I'll be saving around $2000 in interest. Thank you so much for showing me the light! I paid down the original loan to about $100 to avoid the early exit fee. I'll let that simmer for awhile until the exit fee is much lower and then pay it off.

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