Are you trapped in a vicious cycle of debt and looking for ways to break off from the chain? If so, you must have heard about terms such as balance transfer and debt consolidation.
While debt consolidation applies to almost every type of loan, a balance transfer is mostly used to pay off credit card balances. But does it mean that you cannot transfer your personal loan to a credit card and take advantage of the 0% intro APR period?
We are here to help you understand the truth.
Read on to find out whether you can transfer your personal loan to a credit card and take advantage of the 0% intro APR .
Can You Transfer a Personal Loan to a Credit Card?
The simple answer to this question is “yes.” Money transfer credit cards provide you with an option of transferring your existing non-credit card debt to your credit card and benefit from the 0% intro APR for a specified period.
This means that you could end up paying off your debt at 0% interest hence improving your financial situation.
However, there are lots of things you need to consider before you decide to take this route. Keep in mind that in as much as you enjoy low interest rate, there are also potential pitfalls you need to be aware of.
Let us look at how the transfer works before we evaluate some of the potential benefits and pitfalls of this method.
How Does It Work?
Just like any other fast cash loan, you can transfer your personal loan to your credit card via a conventional balance transfer. Most credit card companies provide lenders with balance transfer checks that work like any other ordinary bank check.
If you write a check for the outstanding balance of your personal loan and forward it to your bank, your debt will be paid off, and the credit card provider debit your card account for the exact amount of the check.
If you don’t want to write a check to your bank, you can initiate this process by providing identification information about your personal loan such as how much you still owe and which bank holds the note.
You can provide this information online, and the transfer will automatically be processed in a few business days.
What Are the Benefits?
The most significant benefit of transferring your personal loan to a credit card is that you get an opportunity to save on the interest rate charged on the loan amount.
In most cases, you will be awarded a 0% intro interest rate on transferred balances. This means that if you are paying a high-interest rate on your current personal loan, the overall savings you achieve with a balance transfer can be massive if you pay the transferred debt balance within the 0% interest rate period.
What Are the Potential Pitfalls?
Although transferring your personal loan to a credit card can reduce your interest rate during the 0% APR period, the interest rate will automatically revert to the relatively high rate afterwards.
As such, if you do not manage to repay the loan in its entirety within that interest-free period, you may end up paying much more than you had anticipated.
