Personal Loan or Credit Card for Serviceablity?

Hi,

Hoping the brokers out there are able to give me some guidance on this one. I currently have a personal loan of approx $25k, paying 7.95% interest, which I will pay off in the next two years. I have the opportunity to transfer this balance to a credit card for 24 months at 2.9%. Obviously a decent saving in interest costs.

If I were looking at obtaining finance for a new IP purchase, in regards to serviceability, would I be better off keeping this as a personal loan or transferring to the credit card?

Cheers
Scott
 
Short answer is yes but it will be another credit enquiry.

This may be nothing depending on how active you recent credit file has been and at what LVR you are looking to purchase the IP or it may prove to be fatal so get your broker to confirm this.

If you are unsure of what your credit file looks like then you can order it for free online.
 
Hi,

Hoping the brokers out there are able to give me some guidance on this one. I currently have a personal loan of approx $25k, paying 7.95% interest, which I will pay off in the next two years. I have the opportunity to transfer this balance to a credit card for 24 months at 2.9%. Obviously a decent saving in interest costs.

If I were looking at obtaining finance for a new IP purchase, in regards to serviceability, would I be better off keeping this as a personal loan or transferring to the credit card?

Cheers
Scott

Check the fine print about what the minimum repayment is on the credit facility. The rate is low but repayments are often more like a credit card minimum payment ie 3% of the outstanding balance per month.

From a servicing point of view take 3% of the limit of the new facility and compare to the monthly repayments on the personal loan. Whatever is lower will be better for your servicing. Even if your payments on the card are less than the 3% a month the lenders will apply this in their model.
 
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For credit cards, lenders take about 3% as the monthly repayment. For personal loans they generally take it at actual repayment.

A personal loan is going to be financially better because you usually pay it off in 5 years, but for serviceability purposes, look at the one which has the lower cash flow based on the above repayment metrics.

Of course, the best way to structure this is to not borrow money at all for personal goods.
 
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