How to Transfer Debt to Another Party

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

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.

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.

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

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

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.

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

References

• Bankrate: Transfer a Balance
• Fool.com: How to Win the Balance Transfer Game
• Creditcards.com: Balance Transfer Credit Cards
• 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.

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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.

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