If you'd like to borrow money at really low rates, this sneaky trick gets you a loan which is even cheaper than a mortgage.
If you need to borrow between, say, £5,000 and £30,000 for whatever reason (for example, to buy a car, or pay for a holiday, wedding, divorce or home improvements), a low-rate personal loan might be right up your street.
Thanks to loan rates as low as 5.7% APR, you can borrow quite substantial sums yet pay back only a modest amount of interest. However, you should never borrow more than you can comfortably afford to repay, and you should read these twelve tips before choosing your perfect personal loan.
Then again, if you're sneaky and play your (plastic) cards right, it's possible to borrow substantial sums at even lower interest rates. For example, I know one Foolish reader who bought his new car on a credit card which offered interest-free credit for a year (known as a 0% on purchases card). By paying only the minimum monthly repayments on his credit card and then paying off the entire balance after twelve months, he enjoyed 0% finance for an entire year. That's quite an achievement!
Another way of doing this would be to pay for your big purchase(s) using your existing credit card and then transfer your balance to a card that charges no interest on balance transfers for an extended introductory period. We call these 0% balance transfer cards, and you can learn the rules of the 0% transfer game here.
However, transferring balances between 0% cards every six months or so leaves a series of 'footprints' on your credit record which can hamper your ability to get credit in the future, as I warned here. Hence, an easier and simpler option is to make use of low-rate lifetime balance transfers.
Unlike the wonderful 0% cards, lifetime balance-transfer cards do charge interest, albeit at remarkably low rates. As you can see from the following Best Buy selections, these lifetime rates really are a steal, especially when you consider that the Bank of England's base rate is presently 4.75% a year:
Top lifetime balance-transfer credit cards
Card | Lifetime | Usual rate |
|---|---|---|
Marks & Spencer Money | 3.90 | 16.9 |
3.90 until 01/07/10 | 15.9 | |
Intelligent Finance | 4.95 | 16.9 |
Barclaycard Flexi-Rate Visa | 4.90 | 16.9 |
4.90 | 16.9 | |
Lloyds TSB | 5.50 | 11.9 |
Lloyds TSB | 5.50 | 21.2 |
5.94 | 15.9 |
As you can see, it's possible to borrow money for years (decades, if you choose) and yet pay an interest rate of under 4% a year. However, you should never spend on a lifetime-transfer card, as your purchases will attract interest at the full standard rates that you can see in the third column of the table. Be warned!
Frankly, given that the average mortgage rate is about 5.5% a year, a lifetime balance-transfer is one of the cheapest ways to borrow money that you'll ever come across. Take advantage now while stocks last, because I can only see these crazy rates going up!
More: Use the Fool to find cracking credit cards, perfect personal loans and magnificent mortgages!