The Capital One Platinum credit card beats loans

Personal loans offered great value just a few months ago, now they should be avoided whenever possible.

Damian Clarkson

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The soaring cost of personal loans means it is actually cheaper to put your debt on a Capital One Platinum credit card and pay it off over the same period - with no switching necessary.

It’s a bizarre market anomaly that personal loan rates have increased by around 2% on average in recent months, yet the best credit card deals remain largely unchanged. Whatever the reason, it highlights the need to start changing the way we borrow money.

The Your Personal Loan deal and the MoneyBack Bank personal loan are generally regarded as the two cheapest personal loans, offering rates of 6.7% and 6.9% respectively. The Capital One Platinum credit card has a typical APR of 9.9%, but it offers 10 months interest free on balance transfers and new purchases, and it is this introductory offer that makes all the difference, as the table below shows.

	£5,000 Loan (24 Months)	£7,500 Loan (36 Months)	£10,000 Loan (48 Months)
Your Personal Loan	£5,355	£8,298	£11,425
MoneyBack Bank	£5,347	£8,280	£11,392
Capital One card	£5,183	£8,123	£11,337

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No need to pay for simplicity

People have long known how to get an interest-free loan by switching between the various 0% balance transfer credit card deals on the market (people who do so are sometimes known as ‘rate tarts’, though I prefer 'guerrilla consumers'). But this requires some effort and of course you have to remember when each deal expires, a fact which has led many borrowers to opt for the more expensive, yet simpler personal loan instead.

But the fact that a competitive credit card balance transfer deal like the Capital One Platinum card - apply here - is now cheaper than the very best personal loan offer changes all that. Not only is just as simple to manage, but credit cards also allow far more flexibility than personal loans, allowing you to pay a loan off far quicker (and cheaper) without fear of penalties.

The difference can be quite astounding: Assuming you were able to set aside an additional £69 a month, you would be able to pay off a £10,000 balance on the Capital One Platinum credit card a full year sooner, and bring the total cost down to £10,830 – a saving of £507.

Find out more about the Capital One Platinum card

There’s an even cheaper way
As we mentioned earlier, you may already be aware that switching between credit cards is the cheapest way to lend money, but are simply put off by the hassle.

It’s worth reiterating just how cheap it can be, though – saving you over £1,000 on a £10k loan, as the table below shows. Surely with that kind of saving on offer, it’s worth a bit of hassle?

In case you were wondering, the reason why the total is slightly higher than the loan amount even though it is interest free is because lenders charge a balance transfer fee every time you shift debt to a new card (this is usually between 2% and 3% of the total amount).

	£5,000 Loan (24 Months)	£7,500 Loan (36 Months)	£10,000 Loan (48 Months)
MoneyBack Bank personal loan	£5,347	£8,280	£11,392
Capital One Platinum credit card	£5,183	£8,123	£11,337
Repeated credit card balance transfers	£5,053	£7,659	£10,338

Don’t be fooled by rate cuts
You may have read this week that quite a few lenders have recently cut their personal loan rates.

And while this is true, they are all still more expensive than the Capital One Platinum Card - apply online - and Your Personal Loan and MoneyBack Bank for that matter – so don’t be fooled. Such loans offered great value just a few months ago, but that is no longer the case.

Hopefully the predicted base rate cuts will help change all that, but until then you’ll be far better served turning to plastic.

Apply online for a Capital One Platinum card

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