
You can often transfer credit balances from one lender to another, depending on the nature of the loan. You can open a home equity loan or personal loan to pay off the balance on another bank loan. Credit card providers often offer balance transfer promotions to entice consumers to move balances from one card to another. You might get a 0-percent, six-month offer, for instance, which means you don't pay interest on the transferred balance for a period of time.
Pros And Cons
Balance transfers have pros and cons. The benefit is that you could save money in interest over time and may lower your monthly payment. Some people use a transfer to a home equity loan or line of credit to get a better long-term interest rate than you typically do with unsecured loans or credit cards. However, you may have to pay an upfront finance fee of 3 to 5 percent of the transfer amount. Additionally, if you consolidate credit card debt with a transfer to an equity loan, you may still have bad spending habits that contribute to the build-up of more credit card debt.
References
- My Bank Tracker: What Is A Balance Transfer?
- Experian. "How a Balance Transfer Works—and Who It’s Best For." Accessed March 25, 2020.
- Experian. "What Happens After a Balance Transfer?" Accessed March 25, 2020.
- Experian. "Should I Make a Balance Transfer?" Accessed March 25, 2020.
- Experian. "Can You Pay Off One Credit Card with Another?" Accessed March 25, 2020.
- Experian. "How Many Points Does an Inquiry Drop Your Credit Score?" Accessed March 25, 2020.
- Experian. "What Affects Your Credit Scores?" Accessed March 25, 2020.
- Experian. "What is a Credit Utilization Rate?" Accessed March 25, 2020.
- Experian. "How Do Different Debt Consolidation Programs Work?" Accessed March 25, 2020.
- Experian. "Best Loans to Consolidate Debt in 2020." Accessed March 25, 2020.
- Experian. "What Is Debt Consolidation?" Accessed March 25, 2020.
- National Credit Union Administration. "Personal Loans: Secured vs. Unsecured." Accessed March 25, 2020.
- Experian. "Can Debt Consolidation Affect Your Credit Score?" Accessed March 25, 2020.
- Wells Fargo. "Student Loan Refinancing and Consolidation." Accessed March 25, 2020.
- Federal Student Aid Office of the U.S. Department of Education. "When It Comes to Paying for College, Career School, or Graduate School, Federal Student Loans Can Offer Several Advantages Over Private Student Loans." Accessed March 25, 2020.
Writer Bio
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.