There are two easy ways of getting rid of expensive credit card debt. One is using the option of balance transfer of credit card. The second option is to take a personal loan. Now the question is which is better. You can answer the question only after weighing pros and cons for both balance transfer and personal loan.
- Check the interest rates
The first thing that you need to do is check the interest rates. Usually, on the credit card, there may not be an interest for an introductory period. Though this may seem to be better than a personal loan which will have some interest factor, you must note that at the end of this introductory period the rate of interest that you will have to pay on your credit card would be much higher than the personal loan rate of interest.
- Balance transfer fee
It must be noted that in case of balance transfer on credit card you will have to pay a balance transfer fee. Now this will put an additional burden on you. Thus, once again personal loan seems to be a better option.
- Check for fluctuations in interest rates
In case of balance transfer on credit cards, there will be fluctuations in the interest rates. Now, this is something that you do not face in case of a personal loan. The interest rate remains constant, and you know exactly how much you will have to pay.
- Payment schedule
You also need to check the payment schedule in both the cases. Most of the times it has been found that personal loans will have a much easier and better payment schedule as compared to the balance transfer by credit card.
- Effect on the credit score
Now there are few reasons for which you will want to have a good credit score. You should know that a balance transfer on credit card is going to affect your credit score adversely. But a personal loan can help you in improving the credit score. By taking a single loan and thereby reducing the credit card utilisation rate can help in improving your credit score. It is also important that you must not miss a single instalment of your loan or card because this too can have a negative impact on your credit score.
- Repayment plans
If you have opted for the balance transfer on credit card option, then you need to make sure that you clear the debt within the 0% interest rate introductory period. If you fail to do this, then it can be a problem situation.
What must you choose?
After analysing all the pros and cons, it looks like it is much better to opt for a personal loan. The effects that it has on your credit score and other factors like fees that you need to pay for credit card balance transfer etc. it personal loan is much better. If you thought that getting a personal loan is difficult, then you are wrong.
These days you do not even have to visit a branch. You can apply for a loan online. You will get online approval, and you do not even have to give a security deposit. You get the benefit of flexible tenure. You need not go through any branch visits or paperwork.
The formalities involved are very simple. You have to give your pan number and Aadhar number. You need to submit the current account statement for one year. Your business has to be one year old. You will have to provide valid proof of your business. One thing that you need to ensure is that you must opt for a reputed financial institution for a personal loan.
There will be situations in your life when you may have debts due to various reasons. It is important that you pay off these debts in time or at least try and reduce the interest on them. You can make use of two tools for this. You may take a personal loan, or you can go for a balance transfer on credit card. The overall personal loan is a better option.
Byron Simpson is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance cent.