If you’re considering refinancing your credit card debt, you obviously want to make the smartest and most effective move for your financial future. Singapore’s mature economy and highly-developed banking system offers individuals numerous options for refinancing, so how do you figure out which is the most appropriate for your needs?
The majority of credit card-holders usually gravitate towards either a personal loan or a balance transfer to achieve a reduction in their interest rates. Both have their strengths and weaknesses, and may suit some individuals and situations better than others. In this blog, we’ll compare the two and break down the pros and cons of each.
Volatile and time-limited
Fundamentally, a credit card balance transfer works by transferring the remaining credit on your current credit card to a new credit card with lower interest rates or more favourable terms. Banks and other financial institutions often offer low or zero interest rate terms on your new card, potentially saving you money in the short-term.
Be warned that these new interest rates are temporary in the majority of cases. After a certain amount of time has elapsed – usually 3, 6, 12 or 24 months – the card will revert to its headline interest rate. This can often by much, much higher than the introductory interest rate, and can have a sharp and severe effect on your budget. A 0% per annum balance transfer rate can become 20% in as little as a few months, so understand what you’re signing up for.
Additionally, there is often a balance transfer fee charged for the transfer. This is often represented as a percentage of the balance transferred. Speak to your lender to learn about the terms and conditions of a balance transfer.
The certainty you need in your finances
Where a personal loan excels is in the absolute confidence it gives borrowers. The money is provided as a lump sum – leaving no room for overspending and racking up additional debt – at a fixed interest rate. While lenders can’t offer you a 0% introductory interest rate, the rates they provide are frequently substantially lower than a credit card, meaning that you’ll still save money in the long-run. That means there’s no extra hit to your finances when you’re already vulnerable.
Consider how a personal loan could help you better manage your finances. Speak to a loan consultant at Fast Money today to learn more.