16

Not sure if this is possible but it did come to mind out of curiosity sake.

Assuming you have a $10000 loan for example.

You open up a 0% APR card for 15 months with a credit value of $15000 for example. You charge card via PayPal or some other 3rd party way and take the money from yourself to pay off the loan. Your loan is now in a credit card with no APR so you can pay it off without interest.

IS this a viable option?

EDIT: Seeing some talk below brought up this as a side question.

There are cards that offer $0 fees for transferring a balance over. But It thought that was just CC to CC. Can you actually transfer a loan to a credit card?

  • 5
    Outside of Paypal's transaction fees, maybe. – Magisch May 31 '17 at 13:51
  • 2
    If you somehow manage to do this without PayPal freezing the account, you're still going to end up paying fees, so it wouldn't exactly be "interest free". – CactusCake May 31 '17 at 13:51
  • 4
    A much better option is to work a side job at 1K per month for 10 months and pay off the loan. Don't play the balance transfer game. It rarely ends well. – Pete B. May 31 '17 at 14:32
  • 2
    Get a card with a cash transfer, basically the same thing. – Matt The Ninja May 31 '17 at 20:12
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    @MattTheNinja many cards exclude cash and (cash equivalents) from their 0% introductory offers. You may have to be more creative (like spend on the card and divert the spending to repaying the loan). – Chris H Jun 1 '17 at 10:48
23

Not sure if this is possible...

It is possible! It is called a balance transfer card and most of the major credit card companies offer them. It is possible to save a significant amount on interest during the grace period. However...

Is this a viable option?

Not really. Any card will charge you an upfront fee of 3% to 5% of the balance you are transferring. This really only buys you some time in case you are about to fall behind on payments. For many people it's just a way to shuffle around debt, digging themselves a little deeper into consumer debt with each transfer.

  • 10
    plus the ticking time bomb of the end of the 0% interest period, and the fact that if you use the card for anything else you may lose the grace period for those new purchases. – mhoran_psprep May 31 '17 at 14:03
  • 6
    Not any card will charge balance transfer fees. There are some (if you qualify) that are truly 0%: money.stackexchange.com/a/69737/17718 – TTT May 31 '17 at 16:48
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    Also, Chase Slate (from personal experience) has a 60-day window of 0% for transfer fees and a 15 month 0% APR. Granted the credit approval process may require a higher credit score, but it's certainly possible. – Anoplexian May 31 '17 at 17:13
  • 1
    @Anoplexian You can't transfer loans to a Chase Slate card, though. I used one to get all of my husband's credit card debt onto a lower interest card, but they wouldn't let us transfer the personal loan. I have seen another card recently with similar terms though, so maybe it'd be possible with the right bank. – Kat May 31 '17 at 17:48
  • 2
    Look into credit unions. Logix, for instance, has 0 fee balance transfers, 0 fee cash advances, with an APR on cash advance the same as their (quite reasonable) rate for purchases. You won't find that from any bank or credit card company in my experience, but for credit unions it's almost the norm. @TTT is right; not every card charges balance transfer fees. – Wildcard Jun 1 '17 at 5:51
9

Paypal forbids using their credit card service to "give yourself a cash advance or help others to do so". For small ammounts you may get away with it but pushing $10K through a PayPal account is going to raise red flags.

In the USA it seems that some cards allow balance transfers from other types of loan while others are restricted to credit cards only. So that is a possibility.

Another option can be to find a card with a good deal on purchases. Then move your regular purchases to the card and use the money you would normally have spent on purchases to pay off the other loan.

Remember credit cards can be either a very cheap way to borrow or a very expensive way. Which one they are depends on how good you are at negotiating the traps they set up for you.

If you do use a credit card deal make sure you

  1. use the card exclusively for the deal, there are various traps related to mixing promotional deals with regular card use.
  2. pay the balance in full within the deal period.
  3. Never miss a required payment.
  4. Work out the total cost of the deal including any upfront fees and compare it to the alternative.

Is it overall a viable option? That depends on the details which are not specified in your hypothetical scenario incluing the persons credit rating , what the interest is like on the existing loan, what the expected time to repay the debt is and whether the person has the discipline to stick to the plan.

  • 6
    Note that if PayPal decides you're breaking their ToS, they may hold your cash for an extended period of time, which would be disastrous for OP's proposal. – Kevin May 31 '17 at 19:57
  • 3
    $10K and more always raises flags, embrace the IRS – mbx Jun 1 '17 at 6:56
  • 1
    Even if PayPal doesn't detect a "hidden" cash-advance, the CC company potentially may decide it's a cash-advance (attracting fees + immediate interest). I know my CC (in the UK, but I suspect there will be similar terms in the US) already treat payments to certain organisations (e.g. online gambling) as cash-advances, and while I don't have the Ts&Cs in front of me, I suspect they reserve the right to treat something that looks like an advance as one. – TripeHound Jun 1 '17 at 9:15
5

Played "the balance transfer game" once recently, just as a reference -

Got a balance transfer offer for a sock drawer no-AF card. 2% up-front fee, 0% APR. Grace period was, by the time I acted on it, about 16 months. Used it to pay down an auto loan with an APR slightly higher than 2%, and brought my equity back to positive. Towards the end when I rolled over the auto loan, thanks to the positive equity I was offered a rate discount on the new loan. Essentially this was a piggyback loan on the original auto loan funded by credit card (via balance transfer). Saved some interest charges without having to refinance.

4

Historically, it did work. I had a friend who had a dozen credit cards during college, and every few weeks he would move his balances around among the cards with balance transfers (all with a touch tone phone).

Unfortunately for you, banks figured that game out and added fees for balance transfers that are applied at the time of the transfer.

2

I do this all the time with around 5 credit cards (Chase Slate, Bank of America, Capital One, Barclay Card, and Discover). They will all send me balance transfer checks every month with rates ranging from 0% to 5%. Chase has some of the best rates (0-2% for 16 months). BofA has the best APRs, in case I need to keep the balance on for several months after the transfer expires.

Generally you don't need to jump through hoops to get the money in your bank account. They will usually either wire it directly or you can just deposit the check.

Do make sure you read the fine print on the offer. Most of the time, the offer will show up as a standard balance transfer. Sometimes, they may designate one of the checks as cash advance with much higher rates.

Always double check the transfer fee and post-expiration APR.

Recently did it with Barclay Card and Bank of America, both at 2% for 12-18months.

1

You can do this if you merge Credit Cards with personal loans. You will have to pay 1 upfront fee but you can bounce a balance between 4 CCs almost indefinitely if you do it right. You have to have good credit though.

1

I used to do this all the time but it's more difficult now. Just a general warning that this probably isn't a good idea unless you're very responsible with your money because it's easy to get yourself in a bad position if you're not careful.

You can get a new credit card that does balance transfers and request balance transfer checks from them. Then just use one of those balance transfer checks to mail a payment to the loan you want to transfer. Make sure your don't use the entire credit line as the credit card will have the balance transfer fee put on it as well. You used to be able to find credit cards with 0% balance transfer fee but I haven't seen one of those in ages. Chase Slate is the lowest I've seen recently at 2%.

Alternately, if you have a lot of expenses every month then it's easy to find a credit card where all purchases are 0% interest for a year or more and use that to pay every possible expense for a few months and use the money you'd normally use to pay for those expenses to pay off the original loan. If you're regular monthly expenses are high enough you can pay off the original loan quickly and then pay on the credit card with no interest as normal.

The banks are looking to hook you so make sure you pay them off before the zero percent runs out or make sure you know what happens after it does. Normally the rate sky rockets. Also, don't use that card for anything else. Credit card companies always put payments towards the lowest interest rate first so if you charge something that doesn't qualify for 0% then it will collect interest until you've paid off the entire 0% balance which will likely take a while and cost you a lot of money.

If you have to pay a balance transfer fee then figure out if it's less then you would have paid if you continued paying interest on the original loan.

Good luck. I hope it works out for you.

  • "Credit card companies always put payments towards the lowest interest rate first". This depends on which country you live in. This used to be the case in the UK, but credit card companies must now put payments towards the highest interest rate first. (I know this doesn't help the question author, but adding it for contrast in case it helps someone.) – trichoplax Jun 1 '17 at 16:09

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