Financial Guide: 5 Facts About Balance Transfer That You Should Know
If you want to repay and get rid of your loans and credit card bills, you may consider making a balance transfer. The main aim of this solid repayment strategy is to help consolidate all your debt and reduce the interest charges so that you can pay off your outstanding balances as fast as possible.
Moreover, If you are considering this method to deal with your debts, you should know what type of transaction is most suitable for your case. With that said, here are three primary types of balance transfer that you can avail:
Paying off your outstanding balance on one loan by transferring it to another loan.
Paying off your balance on one credit card by transferring it to another card with a lower interest rate.
Lastly, paying off your balances at once by taking a personal loan.
Whatever type of balance transfer you choose, it is essential to learn more about this process to determine if this is the best option for you. To make sure you’re getting the most from a balance transfer, here are seven facts about this repayment strategy that you should know before signing any papers and or agreements.
Transferring Balances Can Simplify Your Financial Life
Transferring balances to another credit card or personal loan with lower interest rates can’t only help to pay off your debt but can also save you money. Hence, it can simplify your financial life.
If you carry outstanding balances on multiple high-interest credit cards and find it difficult to continue paying on time with minimum payments, you may end up facing costly late fees. To prevent this from happening, you may transfer your credit card balances to a single low-interest card. By doing so, you will only have to monitor one card, and above all, you only have to make one payment each month.
On the other hand, you can also opt for a personal loan balance transfer. In this case, you may transfer your outstanding loan balances to another bank. Thus, you’ll have a chance to switch your existing loans to a personal loan with a lower interest rate. With that, you may reduce the burden of monthly interest on your income and enjoy the benefits of lower EMI or Equated Monthly Installment payments.
Different Loans Can Be Paid Through Balance Transfer
There are numerous lenders and card issuers out there who surely have their own set of rules and regulations. That said, other credit cards and personal loans fall under the eligible category — but this can vary between particular creditors.
In order to make sure what are the debts eligible for a balance transfer loan or what you can cover through balance transfer that suits your needs, you should check your options a couple of times with the creditor before signing an agreement.
On top of that, getting the assistance of a professional who knows everything about balance transfer will help you understand the whole process and avoid the potential pitfalls of other offers.
Balance Transfers Are Not Instantaneous
If you consider making a balance transfer, you should know that it can take weeks to go through. Depending on the lender or issuer and other factors, the transaction may take as early as three days or as long as six weeks.
While the lenders or card issuers may be able to give you an estimated amount of time before completing the entire process, there’s no way to know in advance how long you’ll have to wait.
Moreover, you still need to pay at least the minimum monthly payment for your existing loans or credit cards while waiting. Failure to do so could end up accruing late fees and bad credit. With that, it could obstruct the entire process of your balance transfer.
Zero-interest Offers is Only Temporary
In balance transfer, the zero-interest offers or any promotional rates are not permanent. In fact, they usually last for only 6 to 18 months. Hence, it would be best if you didn’t get complacent with this low APR (Annual Percentage Rate) because it will turn back to a higher APR once the introductory period is over.
As such, when making a balance transfer, you should pay off your balance within the intro period as much as possible. Otherwise, the interest will start accumulating again, and it would be hard to get rid of your loans completely.
How to Make the Most of a Balance Transfer
A balance transfer is indeed one of the most helpful strategies to deal with your multiple loans and credit card balances. If you want to make the most out of this approach, here are some of the things that you should follow:
You should always pay on time.
Stay within your credit limit.
As much as possible, pay off your balance before the promotional or zero percent interest rate ends.
If your card has a purchase offer, you should be mindful of new spending once your promotional offer runs out.
Request a cash transfer if you need access to your money. Why? Because it is less expensive than withdrawing some cash on your balance transfer card.
Ultimately, the key to making the most out of your balance transfer is to use it strategically to reduce your debts. After all, if you won’t use it for other purchases and keep an eye on the promotional APR expiration date, everything will be fine.
Whether you want to transfer your credit card balance with a high-interest rate to a better card or move your existing loans to a personal loan with a lower interest rate, a balance transfer is an excellent move to help you deal with all your debts.
Furthermore, as long as you understand what you are signing and use this approach strategically, you can pay off your balances before the promotional offer runs out. Remember that in order to manage all your debts, you should follow an effective repayment strategy and always be mindful of all your due dates.