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Using a Credit Card as a Short-Term Loan

By: Emma Eilbeck BA (hons) - Updated: 25 Nov 2012 | comments*Discuss
Loans Funds Visa Card Personal Loans

When it comes to paying off personal loans, it is always best to find the cheapest and quickest way possible. People often assume that it is cheaper to take out loans instead of using their credit cards to pay it off, but this isn’t always the case.The best thing about a personal loan is that you have fixed payments, you can pay it back over a set timescale and know where you stand.When it comes to a credit card, providers will often change their rates, the longer you have the card, the longer you could end up paying a lot more than was originally advertised, compared to a low interest loan.

If a visa card is offering a lower rate than the loan provider, then it is worth considering using the credit card to pay back the loan, if you have no other means.Using your credit card funds not only gives you some extra time to pay back the loan, but may also work out cheaper then extending the length of the loan.

Whether you can do this or not is a different question. You would need to get a credit card that allows you to withdraw cash, as the majority of loan providers will not accept payment for loans by credit card. If you do choose this route you will have to make sure that the low interest rate you are paying on the credit card is cheaper than the interest rate on the loan, or otherwise the sums will just not add up. If it is, you should double-check that it will stay this way for the duration of the loan.

What To Be Aware Of

If you are taking out a loan and wish to use your visa card to pay it off, this will effect your credit rating, and may end up making you look like you are in twice as much debt as you actually are. It is also worth remembering that you will have to be organised if you are going to transfer money from one to another, be careful that you don’t get snowed under and forget when you need to make each payment, so end up forgetting one.

It is not normally recommended that you take out more debt to pay off other debt, but if the sums add up, then why not. If you only need a short-term, low interest personal loan though, the interest rate should be relatively low, and this may be the best option. If you do fall behind on your loan payments, you may want to consider using the funds on your visa card to pay for the loan, as an emergency form of payment.

If you only need the money for a short period of time then your first option should be to take out a loan, as this will probably have the lower interest rate, Depending on how short a period you need the loan for, you may be able to find a credit card that offers a 0% rate, if not then you will inevitable end up paying back more.

It’s easy to try and prolong paying back debt as long as possible, which is the temptation of credit cards and loans, but if you can manage to prolong the debt without any extra interest costs the you will have hit the jackpot, just make sure you do your sums, and don’t end up paying the loans years after it should have finished.

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