Cheap Credit Card Loans Use credit cards to get loans as low as 0%

Even the best buy loan under �2,000 is almost 15% APR. Instead, manipulate a credit card to do it at a fraction of the cost. This is a full how-to guide to turning plastic into a loan, letting you borrow much more cheaply; and overpay or underpay without penalty.

Picking the perfect method

The cheapest credit cards can substantially undercut the cheapest loan rates for certain amounts, and allow totally flexible repayments. But you need to get smart, and make that plastic bend to your will.

There are a couple of possible methods, depending on what you need the money to do. Some are simple, others require a bit of playing about. Pick what you need from the options below.

"It ain't what you do, it's the way that you do it."

• "I want to cut the cost of existing credit card debts."
  This is easy. Special 'balance transfer' credit cards are designed for this purpose. They pay off one card with a new one, hopefully at 0% for a fixed period. This allows you to pay down the debt quicker.
  
  If this is what you need to do, don't use the methods in this guide. Instead, read Best Balance Transfers for the full rundown and all the current best buys.
• "I want to pay off an existing loan."
  If you want to make an existing personal loan cheaper, read Cut the Cost of Existing Loans first, as it isn't always simply a case of getting a lower interest rate to make it cheaper. Sadly, penalties can mean it�s not worth switching - the guide has a calculator to help you work it all out. If it doesn't work for you, try another option from the ones below.
• "I want to make a big one-off purchase(s), and can pay by card."
  The easiest way to buy whatever you need on a card that has the longest 0% or low rate for purchases. In other words, it's interest-free (or low interest) on debts from spending, though you must make at least the minimum repayments. See the top 0% credit cards.
• "I need the lump sum in cash."
  A lot of things fit into this category, from buying a new car from a garage that doesn't accept credit cards, to paying back a friend you owe money to.
  
  If you want to keep things simple, or are borrowing a large amount (over about �5,000), check out the normal Cheapest Loans guide.
  
  For anyone borrowing less, or happy to try something a bit more complex, you can get clever and use credit cards with a special feature to make big savings. Please read the whole of this guide in detail though, and ensure you understand it correctly before proceeding. A mistake could cost you big. Jump down to 'Plastic loans'.

BEST BUYS: If you can use a card to pay

If you're going for the simpler route of spending on a cheap credit card, you'll need to apply for a new one - and remember this means passing a credit score. The crucial thing is to ensure it's fully repaid by the end of the 0% period, or switch the debt to a top Balance Transfer card.

Here are the current best buys - more picks and info in 0% Credit Cards. For more card options, see the credit card guides page.

17 months 0% purchase cardHalifax, but some may get 12 or 9 months 0%

• Spending length: 17 months 0%
• Rep variable APR: 16.9% (Official APR Example)
• Card issuer: Mastercard
• Min income: N/A
• Min repay : Greater of 1% of balance plus interest or �5

This Halifax card has 0% on purchases for 17 months. But only a minimum of 51% of applicants will get the deal - the rest will either get 12 or 9 months 0%.

Under EU rules, card providers must "reasonably expect" 51% of those accepted to get the advertised rate. When it's a promo deal, card firms often give it to all those accepted. But Halifax has taken this a step further. The promotional 17 months 0% will be given to "at least" 51% of those accepted. The rest will either get 12 or 9 months 0%. So only apply if you have a top credit rating, otherwise look at the other options here, like Tesco below.

The interest rate after is 16.9% representative APR for. If you don't get the 17-month deal it'll be either 21.9% or 25.9%, so make sure you've paid it off, or you're ready to shift the debt to a new balance transfer card.

16 months 0% purchase card*Tesco, plus collect Clubcard points

• Spending length: 16 months 0%
• Rep variable APR: 16.9% (Official APR Example)
• Card issuer: Mastercard
• Min income: �5,000
• Min repay : Greater of 1% of balance plus interest or �25

The Tesco* Clubcard Credit Card gives 0% for 16 months on new purchases. You must earn over �5,000 in order to apply. After the 0% rate ends, it's 16.9% representative APR after, so ensure you've repaid in full.

• Spending rewards. Every time you spend, you accrue Tesco Clubcard points - one for every �4 spent. If redeemed for Tesco's Clubcard Rewards, they're worth about 3p each, making this equivalent to a 0.75% cashback card.

Tesco often has special deals where you can collect extra Clubcard points and sometimes even make a profit. For more details, read Boost Tesco Clubcard Points.

Sainsbury's*Long-term low rate, no fee

• Spending Rate & Fee: 7.8% APR, no fee (see official rate example)
• Min Income: N/A
• Card issuer: Mastercard
• Min repayment : Greater of 1% of balance plus interest, 2.25% of balance or �5

Alternatively, you can get a card where the low rate is for the long term, not just an intro offer. This means you don't need to shift once the 0% ends, but it isn't quite as cheap. The lowest long-term rate card is Sainsbury's*, at 7.8% representative APR.

Is the rate fixed? While the card is variable rate, credit card regulations mean it's not allowed to increase within the first year. After that, as long as you agree not to borrow more, you have a right to reject any rise. (See the Rate Jacking guide for more info.)

Like all credit cards, to get it you'll be credit scored. While 51% of accepted applicants will get 7.8%, some slightly poorer credit scorers will get higher rates of 9.9% or 11.9% APR. It also has the same rate on debts shifted to the card with no fee, though if you need this it may be better to look at the other Best Balance Transfer cards.

BEST BUYS: Turn a credit card into a loan

If you're after a card that does something other than money transfers, see the credit card guides page.

Some credit cards allow you to do money transfers, which shift cash straight into your bank account, so you owe that amount to the card instead. But the trick is to find a card that offers money transfers at a low interest rate. These cards are best for loans of less than �5,000 or so.

First and foremost, a huge warning. Never, ever withdraw cash and never try to spend on the credit card. Instead, just ask the card provider to...

"Do a money transfer to my current account."

The key to a money transfer is that you�re charged a special promotional interest rate. By asking this way, you'll get the cheap rate, and the cash will end up in your bank. For double surety, explain exactly what you think will happen, and get the card provider to confirm it.

Also, it's crucial you set up a direct debit to make AT LEAST the minimum repayment each month. If not, you�ll lose the special deal and pay the 15%+ APR on all debts. Though it's preferable to pay more than the minimum, so the debt is cleared by the end of the intro deal.

Like any credit card, you'll need to pass a credit check to be accepted. This also determines the credit limit you'll get too, so there's a chance you won't be given the amount you need. If you're concerned about this, reconsider a standard cheap loan.

Top 'money transfer' credit cards

You have two options: 0% cards which are cheapest overall, but MUST be repaid before the interest-free period ends to avoid big costs; or long-term low rate cards which still beat normal personal loan rates in the long run. Compare the cost using the 'What's the rate?' calc below.

WARNING! ONLY use the cards we specify below to do this.
Money transfers are niche and very rarely available.
Use the wrong card and the cost can be massive.

Time-limited 0% deals

MBNA Platinum 24 months 0% with 4% fee

• 0% money transfer length & fee: 24 months 0%, 4% fee (first 60 days, 5% fee after)
• Rep variable APR: 20.9% (Official APR Example)
• Card issuer: Visa
• Min repayment: Greater of 1% of balance plus interest, or �25
• Any restrictions? N/A
• Min income: N/A

The MBNA Platinum card gives 0% for 24 months on money transfers made in the first 60 days, for a one-off fee of 4%.

This is the longest 0% money transfer card on the market. After the 24 months 0% ends, the rate leaps to 20.9% representative APR. It's crucial you make sure the balance is all paid off, or switched to a top balance transfer card, by the time the 0% period ends, otherwise interest will rocket and you'll have lost all the 'cheap loan' goodness.

Always pay at least the minimum monthly repayment, or you'll lose the 0% deals.

MBNA Everyday* 18 months 0% with 4% fee

• 0% money transfer length & fee: 18 months 0%, 4% fee (first 60 days, 5% fee after)
• Rep variable APR: 20.9% (Official APR Example)
• Card issuer: Visa
• Min repayment: Greater of 1% of balance plus interest, or �25
• Any restrictions? N/A
• Min income: N/A

The MBNA Everyday* card gives 0% for 18 months on money transfers made in the first 60 days, for a one-off fee of 4%.

After this, the rate leaps to 20.9% representative APR. It's crucial you make sure the balance is all paid off, or switched to a top balance transfer card, by the time the 0% period ends, otherwise interest will rocket and you'll have lost all the 'cheap loan' goodness.

Always pay at least the minimum monthly repayment, or you'll lose the 0% deals.

Life-of-transfer deals

MBNA Rate for Life5.9% rate for life, with 1.5% fee

• Promo rate and fee: 5.9% APR, 1.5% fee (first 60 days, 5% fee after)
• Rep variable APR: 20.9% (Official APR example)
• Card issuer: Visa
• Min repayment: Greater of 1% of balance plus interest, or �25
• Any restrictions? Need good credit score
• Min income: N/A

Accepted new cardholders who use MBNA's Rate for Life card for a money transfer within the first 60 days get 5.9% APR until the debt's repaid, for a 1.5% one-off fee.

If you can repay quickly, the 0% cards above win. But if you need longer to repay the debt, 'life of balance' deals are far safer. These lock in the cheap rate until you've paid back all the cash, and you won't need to switch once an intro deal ends.

Use the 'What's the interest rate?' calc below to compare this with the 0% cards above.

Is the rate fixed? Yes. It's fixed at 5.9% APR, so provided you get the card, you'll get that rate. But other types of debt, such as spending, are charged at much higher APRs.

6.9% rate for life, with 2% fee*AA Transfer Plus card

• Promo rate and fee: 6.9% APR, 2% fee (1st 60 days)
• Rep variable APR: 20.9% (Official APR example)
• Card issuer: Visa
• Min repayment: Greater of 1% of balance plus interest, or �25
• Any restrictions? N/A
• Min income: N/A

Accepted new cardholders who use AA's* Transfer Plus card for a money transfer within the first 60 days get 6.9% APR until the debt's repaid, for a 2% one-off fee.

If you can repay quickly, the 0% cards above win. But if you need longer to repay the debt, 'life of balance' deals are far safer. These lock in the cheap rate until you've paid back all the cash, and you won't need to switch once an intro deal ends.

Use the 'What's the interest rate?' calc below to compare this with the 0% cards above.

Is the rate fixed? Yes. It's fixed at 6.9% APR, so provided you get the card, you'll get that rate. But other types of debt, such as spending, are charged at much higher APRs.

Make sure you always pay the minimum and pay on time, or you'll lose the 6.9% promotional rate, and be charged 20.9% on the money transfer debt.

The 'What's the interest rate?' calculator

To see the cost of borrowing a lump sum on a credit card, pop your numbers into the calculator and it'll reveal the total interest and fees you'll pay, plus the equivalent of this as an APR. Then compare it to the best personal loan you could get.

Remember, if you borrow more after the initial lump sum, this will change the calculation entirely. Always work out a structured repayment plan to make this as cost-effective as possible - see below for the full technique.

Pay off the card like a loan

The final difference between a loan and a credit card is loans have structured repayments. The amount you pay back each month is fixed, so you�ll clear the debt in a set time. So to truly replicate the enforced discipline of a loan, you need to repay a fixed amount each month.

Simply pay the same amount you would�ve done if you�d got a standard loan, though as the interest is lower you�ll actually clear it more quickly. If you don�t know how much to pay, just get a quote from any lender.

You also have the advantage of flexibility

The magic of this particular solution is you now have the flexibility of a credit card for your debts. Therefore you could�

• Pay off less a month than a loan would cost.
  This may sound good, but means you'll take far longer to clear the debt and pay much more interest. If you do this, keep it as short term as possible. Though if you're focussing on repaying other more expensive debts, it's a good thing.
  
  You'll always need to pay at least the card's minimum repayment, usually 2% to 3% of your outstanding balance, so you could have to pay a little more in the first few months. Ideally though, you should pay more - see Danger: Minimum Repayments.
• Pay it off more quickly.
  The opportunity to overpay a loan without penalty is great. It means you can throw more cash at the debt to get rid of it quicker while paying less interest.

Think before adding the 'insurance'

Payment protection insurance is commonly sold with credit cards - the idea is it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).

But in many cases, it has been mis-sold. Many borrowers didn't realise they were signing up for it, or it was totally unsuitable for them. Some big lenders have been fined.

The protection isn't always bad, though policies sold with cards are often overpriced (you pay a monthly amount depending on the size of your balance). If you want it, compare the lender's cover with standalone providers such as Paymentcare or Best Insurance.

Always be vigilant to check you aren't getting more than you bargained for when you fill in the application, then check your statement each month to check you aren't inadvertently paying for extras if you didn't ask for them.

Never spend on a 'plastic loan' card

Avoid spending on a long term debt card as APRs are usually 15%+ on spending. The lender will put any repayments towards the most expensive debts first, which is good, but it'll take even longer for you to totally pay off the card. If you need a card for spending, see Top 0% Cards.