Personal Loan Balance Transfer
It is wise to take care of your most expensive debt first, and sometimes that involves transferring it over to a cheaper form of financing. If you have accrued a lot of credit card debt, it might be time to take out a personal loan for a credit card transfer.
How to Apply for a Personal Loan Balance Transfer
You must be 18 or over to apply for a personal loan balance transfer. You can use a specific tool to find loans that cater to balance transfers. Because a balance transfer is such widespread use of a loan, most companies and banks offering loans offer some suitable products.
You can use a comparison tool to check and pre-apply for loans. By entering your details as well as information about how much you might want to borrow, you can find out which loans might be an option for you. From here, you can fill in a specific application form with a loan company offering online personal loans. They will usually have a product for if you are looking to borrow money as a balance transfer.
You can often check what loans you might be able to apply for before you even have a credit check performed. If you need personal loans for fair credit or even bad credit, then it might make sense.
How Does a Personal Loan for Credit Card Transfer Work?
A credit card transfer represents a debt consolidation strategy that combines at least two different sources of personal debt into one debt package.
To get started, you need to apply for a balance transfer credit card that combines multiple credit card accounts. Many credit card transfer accounts come with a limited-time, zero-financing incentive that spans a grace period of a few months.
You still need to pay off the money owed, but at a uniform and a sometimes lower rate of interest.
Let's say you owe $200 on an American Express account that charges 22 percent interest. You also owe $900 on a MasterCard that charges 25 percent interest. With a balance transfer, you would combine the two balances to one account with one interest rate.
You have more than one option for consolidating credit card debt; for example, you can use debt consolidation personal loans.
Personal loans help you combine different sources of debt but differ from a balance transfer credit card in a few crucial ways. First, you need to pay back a loan by a specified due date. Second, you can't add more debt to a personal loan. There are other differences as well, some of which depend on the type of personal loan that you receive.
Balance Transfer vs. Personal Loan
There are a few significant differences between balance transfers and personal loans, and you will need to check precisely what scenario you are in before you make the decision.
If you have a relatively small debt but the APR is high and you are worried about the interest it costs you, then a balance transfer might be better in the long run. If you qualify for a 0% interest rate for some time, this can also be another reason to go for a short-term balance transfer. You might be able to pay off the debt quickly and save money on the high rates of interest you are paying.
A personal loan for credit card transfer is still a viable option. If you have a lot of debt and need to consolidate all of your loans into a more manageable repayment, then a personal loan might let you do this over a more extended period. Personal loans can sometimes allow you to borrow against assets, whereas credit cards do not. You can even find personal loans with no bank account if you are using something to secure the debt.
There is no point in getting a 0% interest offer for six months if you are unable to pay off the debt during this time. Instead, a long-term loan repaid in manageable chunks will help. When deciding on a balance transfer vs. personal loan, think about how long you need to pay off the loan.
Reasons to Use Balance Transfer
The most common reason to use a balance transfer is that an introductory rate or offer has expired on older debt, but the balance is not paid off. Getting a personal loan for credit card transfer and consolidating smaller debts might not make sense if the overall interest rate is higher. However, a short-term balance transfer may get you another six to 12 months on another low rate to repay the debt.
In some instances, a balance transfer can help peoples' credit rating. If you get a balance transfer onto a new card with a higher credit limit, then you might find that your credit utilization goes down, which can help people improve a poor score. This isn't always guaranteed, but it is a possible side effect of a credit balance transfer.
A personal loan balance transfer can free up time to plan a budget and get a better financial outlook for how you will be repaying your loan. The prospect of substantial monthly interest payments stacking up can be very intimidating, and personal loan balance transfers can give a bit more room to budget and make a positive change in your life.
Do Balance Transfers Hurt Your Credit Rating?
There are many ways in which a balance transfer can affect your credit score.
- If the limit is smaller, you might be using a higher percentage of your available credit.
- Cancelling several credit cards after transferring the balance can also affect your score.
- If you fail to repay the money as agreed, then you might end up with a damaged score.
You should always consider your credit score when making loan decisions. If you are able to improve your score, then you will likely have better loan options in the future.
Reasons to Use a Personal Loan
A personal loan can cover a wide range of expenses, from a personal loan for medical expenses to funding a much-deserved family vacation. It can also be used to address credit card debt.
Personal loan terms typically last between six months and two years, although for more significant loan amounts, some financial institutions extend long-term personal loans. Loan amounts range from $1,000 to as much as $40,000.
If you are looking to consolidate expensive loans, but you also need extra money in the short-term, then emergency personal loans can incorporate all of this. You may even be able to use small business loans as a form of longer-term financing if your debts are business-related.
The usefulness of a personal loan balance transfer will depend on your credit score. If you are fortunate enough to have a good credit rating, you can potentially qualify for better rates and save more money in the long run. A personal loan balance transfer might last for five years and let you make more significant adjustments to save on interest and regain some financial wellness.
Should You Use a Combination of a Balance Transfer and a Personal Loan?
Consumers will sometimes choose to combine a balance transfer with a personal loan. It isn't always an either-or situation. You might want to put a small amount onto a balance transfer credit card. The rest of the debt could be put onto a long-term loan to allow you to pay it over a more extended period. If you cannot find big enough personal loan, then you might want to put the rest of your debt on a balance transfer credit card.