Because many credit card companies are allowing users to transfer more than just credit card debt to their cards, some Wisconsin residents have started to transfer their car loan debts to credit cards. Turning a car loan into credit card debt can provide some benefits, such as getting a vehicle in the debtor’s name sooner and lowering payments, but it is not without a downside.
One of the biggest draws for putting a car loan on a credit card is that many companies are now offering 0-percent interest rates for transfers. This can reduce the total amount owed on a vehicle loan, but only if people pay off the debt before the introductory period ends. If the loan is not paid off in that time frame, people may end up paying a lot more for their vehicles over the long run.
In addition to possibly adding to one’s overall debt, putting a car loan on a credit card can also have a negative impact on a person’s credit score. Simply getting a credit check can affect a credit rating, and adding a large amount of unsecured debt can also lower a person’s score since secure debt involves less risk for the lender.
Some people in Wisconsin who are not able to meet monthly payments may feel compelled to put car loans on their credit cards. They may find it beneficial to speak with a bankruptcy attorney who may explain their rights and options, help them sort out their finances, and recommend courses of action. Bankruptcy attorneys may clarify the complex processes that those seeking to resolve their debts may have to go through.
Source: NY Times, “The Risks of Transferring a Car Loan to a Credit Card,” Ann Carrns, March 18, 2013