How to Transfer Debt to Another Party

by Colleen Cowgill ; Updated July 27, 2017

Balance transfers or transferring debt to obtain lower interest rates are common strategies for reducing overall debt payments. Many credit card companies offer low or zero interest on balance transfers to new accounts for a limited period of time to entice consumers to transfer their debts to them. People also seek to transfer debts by taking out bank or home-equity loans with lower rates and using the loans to pay off their existing debts. These can be effective strategies for reducing overall debt if used properly.

Transferring Credit Card Debt to Another Card

Step 1

Review the various balance transfer offers available to you by searching online or using a website to compare credit cards like CreditCards.com. Try to locate the offer with the lowest APR, both short-term and long-term. Investigate other factors like additional fees for transferred debt and the length of the zero-interest offer.

Step 2

Develop a debt repayment plan that allows you to pay all or most of your credit card down within the time-frame before the APR increases after you complete the balance transfer. Pay as much money as you can each month. This will help to maximize the benefits of the balance transfer strategy. If you cannot pay down your debts in a timely manner, reconsider whether the balance transfer option is right for you.

Step 3

Transfer your balances through the step-by-step process provided online after you have signed up for your new credit card and then stick to your debt repayment plan.

Transferring Debt to Another Loan

Step 1

Investigate lower-interest secured loan options through your bank or consider taking out a home-equity loan.

Step 2

Decide whether you ultimately want to reduce your overall interest payments or simply lower your monthly payments. This will determine what kind of loan terms you want to seek from the lender. Assess your current financial status thoroughly with a loan calculator (go to bankrate.com) to adequately compare it to other loan offers.

Step 3

Use the new loan to pay off your other higher-interest debts and then make payments towards the new lower-interest loan instead.

Warnings

  • A balance transfer can often be a poor financial decision if you are not prepared to pay off your debts in a timely manner. This is due to the extra fees and interest on a large debt that eventually kicks in once the introductory rate expires.

    Also, beware of the risks involved in using a secured loan to cover unsecured debt. If you default on a secured loan, you could lose your collateral--like a home or a car.

About the Author

Colleen Cowgill is an Atlanta-based writer who has been an independent freelancer since 2008. She wrote for a college publication entitled "The Sentinel" at Ohio State University. Cowgill now works in the video game industry. She studied engineering and business for three years at Ohio State University. She now studies psychology at Atlanta Metropolitan College.