A credit card can be used in several ways to pay for large purchases. It is important to remember that this will likely be an expensive form of credit if the individual does not promptly pay back the borrowed money. However, there are also some advantages for cardholders who get back a percentage of the gross amount of the bill.
Study the credit card amount due on your card, how much of your credit line is available and what the monthly payments would be. Estimate the monthly payment if you had to pay the entire monthly amount of the card. Compare the maximum amount due to the amount of your monthly take home pay. Make certain you can afford the amount due. Remember that credit card loan rates are much more expensive than personal loans and loans made with asset guarantees or collateral.
Estimate the value of the car you wish to purchase. Decide whether you can buy the car by taking a cash advance and paying for the car or whether the cash advance will only be used for a down payment. If you make only a down payment, know the interest rate and term for the loan repayment.
Review the monthly payment for the credit card, assuming you borrow the full amount. Then add the monthly payment for the car if you plan to buy a more expensive car and use the credit card advance for a down payment. Total the two monthly payments. Decide whether you can afford the large principal and interest due. If not, you must look for a cheaper car or find other money to increase the amount of a down payment.
Check your credit history and see if there is extraneous, incorrect or incomplete information on your credit history. Correct mistakes and wait for the card companies to update their records. This could take several months. Look to get a new credit card with a period of zero interest. This will provide some free financing while you work to reduce the debt balance.
Know the two immediate advantages of using a credit card. Some dealers will let you use a credit card directly for the purchase. If you are a cardholder that receives a cash rebate each month (a 1 percent rebate on a $20,000 car is $200) consider using the card, pay off the card and receive the rebate. Or if your finances are shaky, using the card will make the car purchase an unsecured loan and cannot be repossessed.
