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Question By
bishjenl

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Transfering Loan Balance to a Credit Card
I have a Motorcycle loan with $6,000 remaining, but an incredibly high interest rate. I am considering opening a credit card with 0% interest for two years on balance transfers. If I do this, does having the $6,000 balance on my new card affect my credit score? If I have a 790 credit score, what type of hit would it take?

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A couple of things to consider

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1)  Most standard loans have considerable fees for an early pay off.  Contact the lender to find out what fees they would charge and the curtrent pay off balance. Also check with that new credit card company's offer. Some limit what types of accounts can actualy be paid with balance transfers.  

2) With your current score you should be able to secure a personal loan with a better interest rate.  I just took an unsecured personal loan through my credit union for 26K at 2%.  

3) a $6K balance on a loan does not have the same negitive impact on your scores that $6K on your credit card does. 

Hope that helps, Good luck 

Reply by
bishjenl

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Thank you for your help! 

Unfortunately, the lowest interest rate we are able to get (even refinancing elsewhere) is 15.5% because it is a small loan and it's for a motorcycle.  We are having a hard time finding a company that will finance a motorcyle loan. 

We are just wondering if it is worth it to save money in the longrun by paying it off with a credit card to save the 15.5% interest, and take the credit score hit where we both have scores between 775-790.  This would put our total cc utilization at 25%.

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"15.5% because it is a small loan and it's for a motorcycle" ​Nonsense! Your lender is lying to you. Small loans are NOT charged more interest than larger loans. Motorcycle loans are NOT charged more interest due to the type of vehicle being bought. Besides, a loan for this amount could be considered a PERSONAL LOAN, don't tell them it is for a motorcycle, tell them it is for ??? if they ask. Personal means personal so really it is none of their business even though they will need to know. As I asked in my other post, can you pay this off with a credit card? Will the balance transfer card you are thinking about getting provide checks to pay off non-credit card debt? What are your FICO scores? If they are near what you have listed about, 15 percent is robbery. I would stay far away from that lender if this is the case.

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Balance transfers are typically for balances transferred from one credit card to another. If this loan that you have is on a credit card, then you may be able to do this, but you would need to do some research first. If your current loan is simply an installment loan, I don't think this will work for you unless your loan company would accept credit cards for payments. How this would affect your score would not be in your favor. Having a balance on a loan is not nearly as bad as having a large balance on credit cards in regard to your credit scores. Do some reading on Credit Card Utilization, you will find that carrying large balances on credit cards can really hurt your credit (good news though is that it is only temporary until you get your balances paid down). If you have a typical installment loan here and find yourself unable to pay the balance off with a card, you might consider looking for a new installment loan with a better rate to either pay this current loan off or look to refinance this loan at a cheaper rate.

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