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I have an auto loan of $15,000 which I am paying off monthly. It's one of the areas of my personal finance that's just been on auto pilot and haven't really put much thought into, the money comes out every month.

But I realized I might be able to save some cash. I am thinking about using a balance transfer offer from citi, $10,000 at 3% ($300 fee) for 14 months, 0% APR. I am planning to pay it off before then. The 5K I will pay with one payment to the auto loan (I've confirmed there are no pre-payment penalties)

Right now my loan is as follows: 2.94 APR (Paid $308 YTD and $622 last year). Is 2.94 APR high? Or is that on par with someone that has "excellent credit" per credit karma (825)

  • I'm concerned about how this looks on my credit to creditors, does it look shady in anyway? I am planning to purchase a home within a year.
  • Is it possible to negotiate that 3% fee with citi? Has anyone tried doing this before?

Thank you

  • You have $5,000 remaining on your car balance? – quid Jul 31 '17 at 23:10
  • @quid If I initiate the 10k balance transfer I'll have 5k left on the auto loan which I'll pay in one lump payment to close out the auto loan, then pay down on the balance transfer amount (10k) – TheWebGuy Jul 31 '17 at 23:12
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This is what your car loan would look like if you paid it off in 14 months at the existing 2.94% rate:

Principal       Interest        Payment
$15,000.00      $36.75      -$1,091.22
$13,945.53      $34.17      -$1,091.22
$12,888.48      $31.58      -$1,091.22
$11,828.83      $28.98      -$1,091.22
$10,766.59      $26.38      -$1,091.22
$9,701.75       $23.77      -$1,091.22
$8,634.30       $21.15      -$1,091.22
$7,564.23       $18.53      -$1,091.22
$6,491.54       $15.90      -$1,091.22
$5,416.23       $13.27      -$1,091.22
$4,338.28       $10.63      -$1,091.22
$3,257.69       $7.98       -$1,091.22
$2,174.45       $5.33       -$1,091.22
$1,088.55       $2.67       -$1,091.22

You'll pay a total of about $277 in interest.

If you do a balance transfer of the $10,000 at 3% it'll cost you $300 up front, and your payment on the remaining $5,000 will be $363.74 to pay it off in the 14 month period. Your total monthly payment will be $1,099.45; $5,000 amortized at 2.94% for 14 months plus $10,300 divided by 14. ($363.74 + 735.71). Your interest will be about $392, $300 from the balance transfer and $92 from the remaining $5,000 on the car loan at 2.94%.

Even if your lender doesn't credit your additional payment to principal and instead simply credits future payments, you'd still be done in 15 months with a total interest expense of about $447. So this additional administration and additional loan will save you maybe about $55 over 14 or 15 months.

  • This answer is excellent. I would add that there may also be credit impacts associated with suddenly carrying such a large revolving balance. OP didn't mention the card's limit, but maxing it out could trigger limit decreases or closed accounts from other issuers. – Rakurai Aug 1 '17 at 1:21
  • Correct, @Rakurai , but you typically get balance transfer offers for only 20% of the credit limit. – Aganju Aug 1 '17 at 12:09
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    @Aganju - all of my credit cards allows me to do a balance transfer on the entire available balance (minus the balance transfer fee). I think cash advances may be limited to a certain percentage though. – TTT Aug 2 '17 at 4:53

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