In today’s world when every individual is having a single line of credit or juggling between several monthly debt payments, it is quite normal to hear the question of whether to consider a personal loan or balance transfer credit card. This is because both the options allow the individuals to lower the interest rates on their debts or help them in consolidating the debts into a single loan. Though balance transfer are the most sought-after among individuals, personal loans offered by banks and financial institutions typically have lower interest rate as compared to the standard credit card rate.
It needs to be mentioned that personal loans availed from banks can be repaid in EMIs over a longer period of time, when considered to credit cards which comes with low introductory offer that can be availed for a fixed tenure. There is no denying that both balance transfer and personal loan laces the individual with certain specific benefits. In this article, we take a look at which option best suits an individual.
As mentioned, both balance transfer and personal loan comes with benefits. However, before deciding which option to avail that will work best for the individual the below mentioned questions needs to be evaluated:
How will it affect the credit score? - This is the most important question that the individual needs to ask himself/herself before deciding which option to avail among personal loan and credit card balance transfer to help them in managing their debts. This is because a single mistake made while handling a credit card or loan can have a massive say on the credit score of the individual, which can result in some grievances in the future.
How much interest would be needed to be paid? - Evaluating how much money would be needed to be paid as interest also needs to be considered. There is no point availing the option which requires the individual to pay more money as interest when the entire idea is to lower the rates of interest.
Paying which fees makes it worthwhile? - Both credit cards and personal loans involves the individual to pay a charge for availing the services. As such, it is imperative for the individual to determine as to paying which fees makes sense for him/her. While balance transfers requires the individual to pay a fee that is in the range of 3 to 5 percent of the transferred amount, for personal loans banks charge a fees in the range of of 1 to 5 percent of the total amount that the individual has borrowed.
Repayment plan? - This is necessary to be considered as without this the whole point of availing a credit card or a personal loan makes no sense. As such having a inexpensive repayment plan needs to be chalked out where the individual can pay off the balances due on a monthly basis without defaulting.
Types of debt that exists? - Considering the types of debts that the individual has also need to evaluated. This is necessary as unlike personal loans which enables the individual to repay any debts with the help of the amount that they borrowed from the bank, credit card balance transfers have certain restrictions as to which debts can be moved to the card.
Debt to be repaid? - This is another necessary question that needs to be considered by the individual. This is because the option to be availed largely depends on the range of the debts that is required to be paid off. Even if the entire debt amount is not paid off, considering the debt can help the individual eliminate the ones that have the highest interest.