If your credit score is good and you want a cheap way to pay off your high-interest credit card debt, you can choose from many debt consolidation options. Both balance transfer credit cards, which allow you to transfer debt from other sources and pay such little as 0 percent interest for an initial rate, and credit counseling loans, are unprotected personal loans, which you use to pay off your other liabilities, are two of the most popular ways to pay down debt and save money at the same time. Balance transfer credit cards allow you to transfer debt from other sources and pay as little as 0% interest for an introductory period.
Is A Balance Transfer Similar To A Personal Loan?
There are some similarities between a balance transfer and a personal loan, but they are not the same. Balance transfers are tied to credit cards, but personal loans are not. If you want to pay off high-interest credit card debt in a short amount of time, a balance transfer CC might be a good choice. On the other hand, personal loans tend to be better in the long run.
Suppose you move a balance from one credit card to a new one with a 0% APR offer. In that case, you must pay off the whole balance before the end of the promotional period, or you will be charged interest. After this time, any unpaid balance starts to get charged interest at the card's normal APR for balance transfers.
The Benefits And Disadvantages Of A Balance Transfer
- 0% APR on balance transfers is an offer that comes with many credit cards.
- 0% APR for the first 21 months is possible.
- Some cards offer 0% APR on purchases as well.
- During the promo period, you don't have to pay any interest.
- Every payment you make goes toward lowering the principal amount.
- Several credit cards that let you transfer a balance offer rewards or cash back on purchases.
- It's not hard to find balance transfer credit cards that don't charge annual fees.
- After the promo period is over, a balance transfer card's regular APR starts.
- Fees for balance transfers can be up to 5% of the amount being moved.
- If payments are late or taken too long, the 0% APR offer could be taken away.
The Benefits and Disadvantages Of A Personal Loan
- You can choose between different loan terms, which are usually between one and six years.
- You can get up to $100,000 in loans.
- You'll pay the same amount each month for the whole loan term.
- When you move a balance from one credit card to another, the interest rate may be lower than the normal rate.
- You don't have to use the money from the loan to pay off debt.
- It can help you get a wider range of credit and raise your credit score.
- Usually, they are done faster than balance transfers.
- There may be an origination fee.
- If you pay the loan early, you might have to pay the penalty.
- There is no way that they could offer 0% APR.
- It would be best if you stuck to the plan for making payments.
Should I Consider A Personal Loan Or A Credit Card With A Balance Transfer?
If you have high-interest debt that you need to pay off, you could make a case for a debt consolidation loan or a balance transfer credit card. But each choice works best in different situations and for different kinds of customers.
When Debt Consolidation Loans Are Most Effective
- People need a long time, up to 10 years, to pay off their debts.
- Whoever wants the security of a fixed monthly payment and a fixed interest rate.
- People can't use credit cards because they are tempted to spend too much.
When Balance Transfer Credit Cards Work Great
- Anyone with a small debt can pay it off in full during the introductory period of their card, which will likely last between 12 and 21 months.
- People who are responsible enough not to use their credit cards after getting a new one.
Your needs and goals will determine which debt consolidation option is best for you, but you still need the plan to get out of debt. No matter your choice, the key to your success will be to learn how to live on less. Now that you know how a balance transfer credit card compares to a personal loan, you can decide which one might be best for you. If you decide to get a balance transfer card, make sure to compare your options based on things like the length of 0% APR periods, regular APRs, balance transfer fees, and annual fees.