Personal loans? Who needs them?

A borrower needing £10,000 could save £1,054 over a four-year term by using a series of 0% credit. card balance transfer offers instead of a personal loan.

“Lenders have raised personal loan rates sharply in the past six months, making most loans significantly more expensive,” says Chris Gilchrist. “But credit card companies continue to offer lengthy 0% balance transfers, and even though you may pay balance transfer fees, this still works out well below the interest you would pay with a personal loan.”

Over a 4-year period, the borrower saves £1,054 in interest on a £10,000 loan; over 3 years on a £7,500 loan the interest saving is £621 and over 2 years on a loan of £5,000 the saving is £294.

“Commentators have been predicting the end of long-term 0% balance transfer offers from credit cards for the past 18 months,” says Gilchrist. “But we see no reason why card issuers are going to stop competing for new customers, so that provided you have a good credit rating you will probably find a new 0% balance transfer offer available when you need it.”

The current Capital One Platinum balance transfer offer is particularly attractive because of the low transfer fee of 1.7%. This makes it cheaper than a 12-month 0% offer with a more typical balance transfer fee of 3%.