You then pay off your credit card balance with new rates and terms. This is where you transfer your remaining car loan balance to a balance transfer credit card. Using a credit card to pay off your car loan usually involves a process called a balance transfer. When it comes to addressing debt, the idea is that by simply “paying off” a car loan with a low or no-interest credit card borrowers are only left to worry about the principal. That means the longer you carry credit card debt, the more money you will pay in excess of the principal you borrowed—much more so than your auto debt. When you use your credit card to pay off your car loan, you are closing the loan account and taking on the balance as credit card debt instead. Pros of Paying a Car Loan With a Credit Card.

Not only that, but you get to pay off your car faster, too. By transferring your auto loan’s balance to a 0% APR credit card, you could save hundreds in interest charges. Typically, your credit card debt will carry a higher interest rate than a car loan—a 60-month new car loan is currently averaging 4.51%, while the average variable credit card interest rate is 16.79%. For example, if you have significantly improved your credit recently and qualify for a low interest credit card, a balance transfer is a way to reduce monthly payments. Here’s how it works: Step 1: Crunch the numbers to make sure it’s worth it.

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