Cheap Credit Card Loans

The cheapest credit cards substantially undercut the cheapest loan rate, and allow totally flexible repayments. Therefore, slash your borrowing costs by manipulating your card into acting like a loan, allowing you to borrow for as little as 5% - massively cheaper than the cheapest standard loan; and repay, overpay, or underpay without penalty.

• Picking the perfect method
• Turn a credit card into a loan
• Best Buys: The Top Cards
• How to get the debts on the card
• Pay off the card like a loan

Cut the price with plastic

Picking the perfect method

The method needed to get a plastic personal loan depends on what you want to do; some are simple, others require a bit of playing about.

It ain't what you do it's the way that you do it

• To cut the cost of existing credit card debts.

  This is easy, it's what credit cards balance transfers are designed to do. Done right credit cards spank the bottom of loans, they're simply much cheaper and better. For full details on this including the best deals, read the Best Balance Transfers article.

• To make a big one-off purchase, or range of purchases.

  Providing the vendor will accept a credit card, the easiest way to do this is simply to buy whatever you need on a card that has the longest 0% rate for purchases; in other words it's interest free on debts from spending (full details of the current cheapest in the Longest 0% for Spending article). Yet of course once the 0% period ends the rate will shoot up, yet then simply use the Best Balance Transfer article to keep it cheap.

• To get a cash lump sum / to buy from somewhere that doesn’t accept credit cards / to cut the cost of existing loans.

  There’s a lot of things that fit in this category from buying a new car to paying back a friend you owe money to. To do this cheaply we need to get clever and use a complex route. If you're new to MoneySaving or find finance difficult, don’t bother; you're a lot better off clicking to the much more straightforward Cheapest Loans article.

  Yet if you’re willing to put the work in, you can make serious savings. Please read the whole article in detail though, and ensure you understand it correctly before proceeding; a mistake can cost you big.

  Those looking to try and make their existing loans cheaper should first read Cut the Cost of Existing Loans, as it isn't always simply a case of getting a lower interest rate to make it cheaper. Sadly penalties can mean it’s not worth switching, that article has a calculator to help you work it out.

Turn a credit card into a loan

Contrary to common myth, the best credit cards are much cheaper than loans, even for long term debt; so if you want to borrow, they’re the cheapest way. Of course the worst credit cards are an abomination, so this does assume you’ve an adequate credit score to get the cheapest products.

The challenge…

Credit cards have different interest rates for different types of transactions; yet by far the cheapest rates are offered for balance transfers, which is when debt is shifted from another credit card. Don’t ever simply withdraw cash on a credit card; do that and you’ll pay a fortune in interest.

The challenge therefore is to legally twist the situation so the credit card is technically receiving a balance transfer, even though in fact you’re paying off a loan, or getting cash to make purchases.

I’ll explain exactly how later, but before that we need to ensure you can get a decent credit card deal to make this worthwhile.

Best Buys: The Top Cards

There are two types of top balance transfer deals:

• Player's route! Cheapest but more difficult. Be a 0% credit card tart.

  The cheapest form of long term credit is gained by being a credit card tart. This means using balance transfers to disloyally shift debt from short-term 0% offer to short term 0% offer.

  Unless you’re just looking for a short term loan over a year or so, you’ll need a good credit rating to ensure you can continue to get the right cards again and again. Plus you’ll need to be good with money, as if you fail to switch in time the cost shoots up. Full details of the top 0% credit cards are in the balance transfers article.

• Best for most people. Long term cheap debt offers.

  Here, rather than faffing around, get a card which has a long term cheap debt offer. The card you choose depends on how long you plan to take to pay it off. This is a far safer option than tarting when replicating a loan, as once you have the card with the appropriate credit limit you’ve surety of the rate until you’ve paid it off.

  The current top long term balance transfer card Barclaycard Platinum at 6.5%, works out at 6.3% APR, if you borrow £4,000 and pay it off over 4 years

How to get the debts on the card

Before starting, ensure you’ve been accepted for one of the cards above or there’s no point; remember all the deals are for balance transfers, not purchases or cash withdrawals, so you can't simply pay it off directly. The explanation below assumes you’ve chosen the long term cheap debt offers, though exactly the same technique applies for tarting.

The secret is by using a mule card

You also need to already have an Egg Money card (not to be confused with the standard Egg card). Currently this is not accepting new customers; if you dont already have one, see Short Term Loans for an alternative method.

Egg Money is a hybrid card, a cross between a bank account and a credit card. It allows you to pay cash from it directly into your bank account at no cost. Therefore this can be used as an intermediary card, a mule card, as a way of getting the debt onto the cheap balance transfer cards.

Most normal cards either don’t permit this, or charge a fee and possibly interest for doing so.

Ensure you pay off the card like a loan

The one final difference between a loan and a credit card is loans have ‘structured repayments’; the repayments are fixed so you’ll clear the debt in a set time. Thus to truly replicate a loan you need to repay a fixed amount each month. Simply pay the same amount you would’ve done if you’d got a standard loan, though as the interest is lower you’ll actually clear it more quickly. If you don’t know how much, simply get a quote from any lender.

Yet you also have the advantage of flexibility

The magic of this particular solution is you now have the flexibility of a credit card for your debts. Therefore you could…

• Pay off less a month. This may sound good, but it means you will take far longer to clear the debt and pay much more interest. If you do use this option, only do it for a short term, not permanently. However if you're focusing on repaying other higher interest debts more quickly, then it's a good thing.

  Do remember though, you will always need to pay the card's minimimum repayment, usually 2% to 3% of your outstanding balance. This may mean you have to pay a little more in the first few months. Again though, let me reiterate, don’t just stick to the minimum as that can cost a fortune; the more you pay the quicker you’ll be debt free and the less interest you pay (see the Danger: Minimum Repayments article).

• Pay it off more quickly. The opportunity to overpay a loan without penalty is great, it means you can throw more cash at the debt to get rid of it more quickly and pay less interest.

One final warning

Even at a long term 6%, be careful. Never, ever, ever use the long term debt card for spending on. Do that and the lender biases your repayments towards paying off the cheap debts first.

This means your expensive debts from spending are trapped in, quickly accruing interest until you've paid off all of the loan debt. If you do need to spend on a credit card, use a totally different card altogether (see Best Card for Spending).