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Azz
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04-02-2013, 02:24 PM

Credit cards - are they good for short term 'loans'?

I noticed that a few times on these 'house' programs that people max out their credit cards when doing up their houses before selling them, and so am wondering whether it's a good idea (desperate to finish this house and sell it and move tbh!)

So basically, use the CC to buy the new kitchen/bathroom/materials etc, then sell the house and then pay off the cards, while in the meantime pay the lowest amount per month.

The main worry that comes to mind is that there if there is a delay in selling the house - and the monthly bills could end up horrendous.

How does the 'pay minimum' per month on credit cards work anyway? We have always paid off the credit card bill every month so have never used it as a 'loan' mechanism before.
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Lucky Star
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04-02-2013, 02:36 PM
Don't some do interest free purchases for a period of time? I think some charge a fee too though and if you do pay interest it can be around 17% or so.

I'm the same as you, always paid the bill straight away so I'm not sure how it works.
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SneaksyWhippet
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04-02-2013, 02:44 PM
If it's a 0% interest on purchases card (some are up to two years) then yes, it's probably the best way to borrow money short term. If you have good credit history this is the avenue to pursue.

Personally I would divide the total balance on the card by [remaining 0% months minus one] and pay this amount off every month. That way the balance will be clear without you paying a penny interest. Or if that's not feasible, you could look at stoozing if you don't have the cash to pay it all off (transfering the balance to a 0% on balance transfers card when the 0% period ends), but this will incur a fee (typically 2-3%).

If it's not a 0% card then it will depend on the rates as to whether it is competitive; it may be that a personal loan (or better still, budgeting and belt tightening) is the way to go.

In terms of minimum payments, the rules differ from card to card. It's generally a certain percentage of the balance or a set amount (whichever is larger). Due to the % thing this means they take ages to clear as the payments get smaller as time goes on (assuming no more spending is done on card). You really don't want to be doing this unless you're on a 0% card and planning to stooze or pay off at the end (e.g. house sale), or you'll be stung with interest.
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tokiayla
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04-02-2013, 02:49 PM
I have just finished renovating a house and went WAY over budget - I applied for an interest free credit card to put some of it on - no charges or interest for 6 months, but knew when the house was finished, I would be remortgaging and pay it off, well within the 6 month time period.
I made the minimum payment for 2 months and paid it off in the 3rd.
I know some people would reach the end of the interest free period and then transfer the balance to a new card - I think you then get charged for a balance transfer?
Some cards are interest free for a year.
I think I would only do this if I knew I could afford the minimum monthly payments indefinitely.
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Azz
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04-02-2013, 03:05 PM
Thanks for the posts guys - very helpful Unfortunately none of our credit cards are 0% - we've had them for donkey's years (tho I guess we could get new ones).

Any ideas what the min payment per month would be on 10k? Just a rough idea as a guide will do.

The idea would be to do the house up in 3 months and sell it in another 3, so 6 months total (as we'd pay the amount back once the house is sold). Just wondering how feasible it might be :/
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SneaksyWhippet
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04-02-2013, 03:51 PM
Some of the longest 0% on purchases deals at the moment:

Halifax - 17 months (some get 12 or 9)
Minimum: 1% of balance or £5 (whichever is greater)

Tesco - 16 months
Minimum: 1% of balance or £25 (whichever is greater)

M&S - 15 months
Minimum: 1% of balance plus interest, 2.5% or £5 (whichever is greater)

Barclaycard - 14 months
Minimum: 1% of balance plus interest, 2.5% or £5 (whichever is greater)

Most seem to be around 1%, so on a balance of £10k that's £100 per month.

Yes, you need to get new cards to get the best deals! And I imagine you'd need svery clean credit history to get a £10k limit (or maybe just high income).
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Azz
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04-02-2013, 04:42 PM
Thanks again for the info Gemma

Ok I've phoned two of the CC companies, and they don't offer any special deals (well one does on balance transfers until 12 feb for 6 months - but that's no good really).

One has said on a 4K balance they would charge 16.9% interest, so:

£56 interest per month
plus 1% of balance, £40
Total of £96 a month

Another card for 10K would charge 15.9% so:

£130 interest plus £5 (if not paying 1% of balance per month)
Total £135 a month

They said I could cancel the card and re-apply for a better offer, as even if I applied for a new card with another company they would take into account existing credit limit (so implied I might not get approved for additional cards).

£135 p/m is doable... but would want to sell the house within 6 months tbh.

I might ring some of the other cards too, though I expect it will be the same - wonder if the M&S card will be any better
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SneaksyWhippet
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04-02-2013, 05:20 PM
£56 or £130 per month interest?! YIKES!

Definitely worth looking into a 0% purchases card, even if you only put some of the cost on it (lower credit limit). The less you can have at 16-17% APR the better!

I know you're not keen on linking to other sites but as it's not dog related...

http://www.moneysavingexpert.com/cre...0-credit-cards
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joto
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04-02-2013, 05:48 PM
I would also ring a few local estate agents and find out if houses in your area are moving at the moment as you could really get caught out if it takes ages to sell and you might have to drop the price quite a lot for a quick sale.
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Azz
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04-02-2013, 05:51 PM
Thanks for the link Gemma some good info there (links are fine so long as they're not dog forums or SNs )

Getting a new card is definitely worth considering!

Originally Posted by joto
I would also ring a few local estate agents and find out if houses in your area are moving at the moment as you could really get caught out if it takes ages to sell and you might have to drop the price quite a lot for a quick sale.
Yeah, that's a worry Joan. Unfortunately I think things are pretty slow around here at the mo :/ (but was hoping a house with a new kitchen might swing the balance and get us a quick sale )
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