Adventures in 0% Balance Transfer refinancing my Auto Loan

I mentioned before that I was planning on using a series of 0% balance transfers to pay off my auto loan.  If only it were as easy as giving American Honda Finance Corp (AHFC) my Visa number and being done with it.  Well, never that simple, but it wasn't too bad either.  Here are the details.

My existing loan is a five year loan at 5.64%, .  I have been paying well above the minimum payments with the intention of paying it off in about 18 months.  It was pointed out to me when I first posted my balance sheet that I was being foolish by not paying off a 5.64% auto loan when I have over $56,000 in ING savings earning 4%.  At first I resisted, but finally agreed that I was being foolish.  I resisted because my Fiancee and I are hoping to buy a house in the next year or two, and this money would be a major chunk of our down payment.  I also resisted because, it's one of those weird psychological things where my brain says, "but I worked so hard to save this money, I can't just use so much of it all at once!"

So, off to the 0% Balance Transfer card search I went.  I first applied to Citibank.  They approved me for $5300.  I spoke with a representative who confirmed that there is no balance transfer fee, and the 0% on the BT is good until April 2007.  They agreed to go ahead and send me a check for $5250, which I just received yesterday.  My minimum payment will be around $79.  I am going to cash it, and as soon as my bank clears it mail send that amount off to AHFC, bringing my balance down to around $12,380.

The next card I applied for was the Chase card.  They approved me for $10,500.  We like Chase.  They, however, would not send me a check.  The balance transfer must go to another credit card.  So, I gave them my MBNA Visa card number, which has a low balance.  I had previously called MBNA to make sure that in the event of overpayment, they will send me a check.  Chase agreed to send a BT payment to MBNA in the amount of $10,000.  At first they wanted to charge me a fee of 3% of the BT amount.  I told them immediately to go ahead and close the account.  I was transferred to a supervisor who acquiesced.  So, I confirmed no BT fees, no annual fees, 0% interest until July 2007.  My minimum payment will be around $200.  That will bring my AHFC balance to around $2,380.

I guess I'll go ahead and make a withdrawal from ING for that amount and pay the sucker off.  So my payments for my car will go from $416 minimum, plus the additional amount that I was paying monthly, to around $279.

Net result:  I will have more cash flow for the next year.  I will deposit the money that would be going to my car payment into my ING account, earning 4% (I know I can earn more at Emigrant), and I will pay the card balances in full before any interest kicks in next year. Either that or I will find a new card to BT.

Comments

[financial freedumb]

Congrats! Paying your auto loan with money from a 0% bt lessens the pain a bit doesn't it? Rather than paying the entire loan off with cash saved up. Then when it's time to pay the 0% bt off, it still feels crappy, but since there's no option, it doesn't feel quite as bad. A win-win-win situation I guess...I just got my title for my car yesterday at the credit union...so no more car loan! :)

[Easy E]

Just so you know, having a high balance on those credit cards will not look so good when you go to get your mortgage.

[lamoneyguy]

FF - thanks, I'm looking forward to getting my title.

EE - yea, I will pay the CCs off at least two months before I go mortgage shopping.

[Dus10]

That is awesome. I am in the process of reducing the interest on my wife's van by 2.5%. I wish I could get to 0% interest with credit cards, but my credit is shot. It would be fine, except that I had to get another vehicle financed late last summer, and it wasn't so great then. They did 9 hard pulls on my credit in one day. I will never by a vehicle like that again. That, almost all by itself, ruined my credit for now. Those should be falling off of there in three months, though, so that will be nice.

[Jessica]

Thanks for this discussion. I'm trying to think like a rich girl and this seems like a great idea.

[balance transfer analyzer]

Smooth! I have aslo heard that you can save a good deal of money on balance transfers getting a new credit card every half a year or so. You know, some of those offers last only for certain period of time. As soon as the time is over you might as well apply for a new card!