I’m so glad you stopped by to read the third post in my series “Money Solutions”. This post is about balance transfers versus debt consolidation loans and helping you figure out if either of these is an option for you.
So what are balance transfers and debt consolidation loans? The simplest way to explain it is that balance transfers refers to transferring all your credit card balances to one credit card with a lower interest rate (this is a type of debt consolidation) and with debt consolidation loans you can pay off your credit cards and other loans together. With debt consolidation loans you can take on most types of debt that are not associated with an asset, and balance transfer offers are only for credit card debt.
You might ask “which option is right for you?”. This depends on your situation. If you high-interest rate credit cards and you are trying to pay them off but it seems no matter how much money you send to your card your balance doesn’t go down because the interest is killing you, then a balance transfer is a good option for you. There are many offers out there. Look for ones that have no fees or low fees with 0% APR introductory rate offers. The longer the introductory rate the better for paying your balance down. Just keep in mind that when the introductory period is over you will be charged an APR!
If on the other hand you have several cards and let’s say a personal loan as well, a debt consolidation loan would be a good option for you. Look for a credible debt consolidation program. These programs can sometimes negotiate with your lenders on your behalf to get you even lower rates.
Another benefit of either of these options is that you have only one payment to make reducing the risk of forgetting to pay one of your cards or having to juggle so many accounts that you get confused what’s due when.
Which ever you decide to try remember – don’t go off and close your old cards after you have transferred or consolidated. This can hurt your credit score by decreasing your credit history. Instead, put those cards away in a place that you will not be tempted to use again and run up your balances.
Lastly, do your homework! Research, research, research! Whether you are transferring balances or getting a loan make sure you do the math, research the company making the offer and ask questions before you make a decision.
Thanks for reading!
*Information provided is for informational purposes only and is not intended as a substitute for professional advice.