0% Interest 6-12 Months
February 27th, 2008 | by admin |A useful financial tool is to make use of credit cards and loans which offer introductory rates of 0% for between 6 and 12 months (in some cases upto 15months)
The advantage of using these credit card balance transfers is that you can keep your debt paying no interest. The savings on interest payments should be used to pay off you debt capital, rather than just paying.
For a credit card user with £2,000 debt, the savings can be very significant. Normal interest charges on a £2,000 credit card debt would be around 18%. This is at least £360 a year interest. It is often the case that people paying the monthly repayment only meet the interest charges so do nothing to reduce the capital and therefore, their debt problem only gets worse.
However, if you can stop interest payments for a period of 6 - 12 months, you have an opportunity to make extra payments.
Note many credit card companies will charge a balance transfer fee of around 2-3%. But, if the transfer is for 12 months, this works out at a very low interest rate. For this reason it is better to get a 12month interest fee period rather than 6 month.
The most important thing on getting a 6 month interest free period is that you don’t miss any payments. If you do miss payments you will probably
- Balance will revert to the lenders standard rate of 17% or greater
- Gain negative credit score making it difficult to get credit cards in the future
- Pay a penalty as well.
To avoid this problem sign up for a direct debit to automatically take minimum payment
