using 0% credit card to pay off balance of 10.99% auto loan

[noobafterbk]

As the heading suggests, is it a wise thing to pay off my auto loan using a 0% credit card, balance would be appro 8k put on a 10k limit credit card, so every payment would essentially pay down principle
is the closure of my auto loan which is 17 months old plus the higher cc util likely to drop score a lot or would it not change that much.......i don't need credit for the next year so my goal is paying down balances asap

[RobertEG]

Creditors grant introductory 0% rates for a good reason.

Their stats show that most consumers will not repay the debt within the intro period, and thereafter, the remaining balance reverts to the general account APR.

That APR is almost assuredly higher than the current rate on your auto loan.

You never know what can occur between now and the end of your 0% period, so it is a gamble that you will repay before the rate jumps.

Additionally, paying off the auto loan will not help much under FICO.  Your percent balance remaining on the loan is not a highly weighted scoring factor.

% util of revolving is highly weighted.

Do you have other installment loans that will still provide you the mix once the auto is paid?

All in all, the plan is a bit questionable.

I personally would not do it.

[Revelate]

It's not a full 10.99% savings as there will almost assuredly be a fee for it (requires math but assuming it's a 12 month term and you pay it all off in 12 months, fee x 2 is effectively the APR for napkin math); however, it wouldn't be a terrible idea from a financial standpoint to look at how long the 0% offer is good for, and then figure out what you can pay off in that time frame, and do that.  Maybe.

Lender might be suspect on that (check terms carefully and anecdotally lenders scrutenize what amounts to cash advances heavily) but that would potentially save you cash, and not take any substantial hit for the auto loan closing early if you don't pay it off completely.

That all said, paying off the auto loan altogether if that is your only installment, could sort that FICO wise with a share secured loan easily enough but you didn't post your scores but it may simply be better to refinance the auto loan to some lower rate if your scores now support it.

[noobafterbk]

thanks for the reply. it's an 18 month period, 3% fee for transfer. I was hoping to pay off the vehicle in 18 months. I have a great mix of other credit lines, just don't like to pay a portion of the monthly amount toward interest every month if I could make payments that are 100% principle.

[Revelate]

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@noobafterbk wrote:
thanks for the reply. it's an 18 month period, 3% fee for transfer. I was hoping to pay off the vehicle in 18 months. I have a great mix of other credit lines, just don't like to pay a portion of the monthly amount toward interest every month if I could make payments that are 100% principle.

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That's what, like a 9% interest savings napkin math?

Seems reasonable to me financially, the lender may quibble about the cash advance but beyond that there's no real downside; even if you only make a significant dent in it the remaining 20% APR on some fractional interest is going to be way less than what you're paying now.

Other than the loan payoff penalty if you have no other installments, and as stated you can sort that for way cheaper than an auto loan, or just not pay off the entire thing.

[RonM21]

Certainly sounds like it can be a considerable option if you way everything out and it makes sense. Obviously, the keys are the cash advance and the ability to pay off before the intro rate goes away.

[takeshi74]

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@noobafterbk wrote:
the higher cc util likely to drop score a lot or would it not change that much......

80% is very high.  90% is typically considered maxed.  Keep in mind that it's not just a matter of scoring but risk assessment as well.  How long would it take you to get that card's revolving utilization down?  How long to 50%?  How long to 30%?  Short term high utilization generally isn't an issue though, depending on credit profile, a sudden spike could exceed a creditor's risk tolerance.  Prolonged high utilization can lead to adverse action.  If you could pay the credit card down quickly you'd probably be better off just paying down the auto loan directly IMO.

There isn't enough info in your OP but I would guess that if you had a stronger credit profile that you wouldn't have a rate of 10.99% on the auto loan so spiking a card at 80% is probably not a good idea.  As stated above, installment debt like an auto loan is seen as less risky than revolving debt and you'll lose the benefit to Credit Mix when you do pay off the auto loan though this is a much smaller factor than revolving utilization.  See also:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

However, there's isn't enough info in your OP for us to really assess your credit profile.  Maybe it signifcantly improved since your auto loan was approved.

You definitely need to do the math to understand the dollar impact of just continuing to pay the auto loan versus transferring.  Compare the transfer fee to the interest you'd pay and consider how quickly you can pay things off and what happens if something comes up and you can't pay off the 0% balance before the offer expires.

[noobafterbk]

thank you for all the feedback, a drunk driver just totalled my vehicle last night. So i guess the issue is now moot. 

[EW800]

So sorry to hear about the totaling of the vehicle. I hope nobody was injured and that insurance takes good care of you - and that the drunk driver is held accountable!

[noobafterbk]

I can only say that USAA has been fantastic, my injuries are minor thankfully. As to the other driver who knows, i know he will likely be let off with a loss of driving license, which by the sounds of it doesnt matter to him, cops already knew who he was when they arrived? Thats Florida justice for you!!!!

i will make sure to that negotiating a settlement with his insurer Progressive is too my benefit. This happened at 6pm - i mean who is drunk at 6pm on a work day?