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Loan or Credit Card

Although at Select Factoring, we’re experts in Factoring. We also like to give advice on other financial matters.

Recently a friend asked some advice about taking out a loan to purchase a new car. Ok, I thought and did some research into the lowest interest rates on loans and whether that would be the best way to raise funding for this little treat.

My friend only wanted to take out a loan for £3500, which when you put into the system, actually brings up the interest rates. The more you borrow the lower the interest rate, and at the moment you can get rates as low as 6.3% which is pretty good, but that’s if you’re borrowing around £10,000.

Smaller loan rates tend to be around 12.9% which is a high APR. What were the other options? In a case like this taking out a credit card with a 0% balance transfer is probably a better idea.

Barclay’s Platinum are currently offering 22 months at 0% on balance transfers with a 2.9% fee, and if you go over £3000 you get £40 cash back towards the fee. So if we transfer the whole of the £3500 into my friends bank his fee will be around £101.50 and with the £40 cash back it makes it £61.50. So rather than paying over £300 on the interest of a loan, he would only be paying £61.50 for the card. Its good to be savvy these days and see where you can save yourself some money.

The other option was to use the money available in his overdraft, as unless stated, banks will not charge you for using your overdraft if it is agreed. In this case you’re not paying any interest at all, but to some people going into their overdraft isn’t a thing they particularly like doing. It’s understandable, we all want to be as much in credit as possible.

There are some great credit cards on the market at the moment, you just have to take time to read up about what they do and how much they cost and weight up the pros and cons.

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