Can I use a 0% APR credit card offer to lower my student loans? The short answer is yes but you need to really pay attention and take into consideration the one time balance transfer fee.
Many credit cards offer balance transfers and one of those options is to balance transfer directly into your bank account. This allows you to use that money however you see fit. This option with a 0% into APR can allow you to save on interest by paying a chunk of student debt up front so it doesn’t accrue interest.
Most of the time there is a transfer Fee of 5% of the transfer amount, but cards like chase slate will waive that fee for the first 60 days.
What if I can’t pay my entire loan off, will I have to keep making payments?
Yes, most likely you will have to keep making payments. So the problem arises, you need to pay yourself to be able to pay the credit card loan off when the Intro 0% APR Period ends and be able to pay your required student loans payments. If you can’t handle paying yourself and your student loan required payment, then this may cause you more debt in the long run.
What you can do is plan ahead, and when you have a chance to go into forbearance, you can solely make payments to yourself allowing you to accumulate enough money to pay off the credit card at the end of the intro period.
So What If I Think I Can Make Payments To Both Myself And My Student Loan
Since the 0APR period if for 15 months, you can take the money you would have paid to your student loans and put it into a CD such as the Barclays CD, which gives you 2.55% for a 12 month CD.
Here Are Some Number In Action
First Calculate how much you can afford, to pay yourself. For example, taking balance transfer of $5000 means that you have 15 months to pay that back or $5000/15 = $333.34 a month payment you need to diligently put away into savings. Next, you get the balance transfer card, and transfer $5000 into you bank account with a 0% transfer fee. You then make a lump sum payment to your student loans of $5000.
Finally you start paying yourself $333.34 a month which you will put into a barclay savings account which gets 1.9%. Which is $.52 your first month in interest, and $1.20 you second month, and so on until your last month you are making around $8.50 in interest that month.
Not only are you saving 6% interest on your student loan, but you are also making interest in you savings account.
For $5000 loan will save you about $375 in student loan interest and can accrue you nearly $60 interest in your savings account for a grand total saved of $435.
