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Managing credit cards and handling finances are a key part of running a business. An underutilized option for paying off debt is a balance transfer. A balance transfer allows you to transfer debt from one credit card to another credit card. Business owners can utilize balance transfer options to manage their debt. Typically, credit card companies incentivize these transfers with low promotional rates. Balance transfer may help you improve your credit and pay off your debts. These are some options to consider using balance transfer on.
Student Loans
Business owners can use a balance transfer to help alleviate student debt. Student loans can plague you for years after graduation. Many business owners struggle to pay off their loans and manage their business at the same time. It may be in your best interest to transfer your loan to a credit card. Though credit cards usually have higher interest rates compared to student loans, there are balance transfer cards with special promotional rates. An important thing to note is that you do not need to transfer your whole loan, you can transfer a portion of the money owed. By transferring a portion of your student loan balance, you can reduce the total amount of money that you owe.
Car Loans
Car loans can be transferred through balance transfers, but there are some other factors you must consider. In the case of transferring a car loan, you must be knowledgeable about your payment conditions. If you don’t repay the entirety of your loan on time, you may be charged interest on the whole balance, and not just the remaining amount. In contrast, one of the benefits of converting your auto loan into a credit card balance is that you’re no longer at risk of repossession. Auto loans are usually considered secured loans, which means your car can be taken as collateral. Transferring your auto loan turns it from a secured loan into an unsecured loan. If you do use this method of balance transfer, make sure that you can pay off the loan before the end of your promotional interest period.
Credit Card Balances
Although we’ve mostly discussed loans up to this point, you can use balance transfer between credit cards as well. Transferring your balance from one card to another may be beneficial for lowering the amount of interest you pay. Even if the promotional period for the interest rate ends and you haven’t repaid the balance, you can transfer that balance. As long as the interest rate on our new card is lower than your old card then, you’re still paying less interest. There are a few factors to consider before transferring your balance from one card to another. You will not get points or rewards for transferring your balance to another card. As long as you can pay back multiple cards, it may be more beneficial to have multiple cards so you can take advantage of cash back bonuses and rewards.
Personal Loan
With balance transfer options, it is possible to transfer a personal loan to a credit card as well. Personal loans do have different conditions to keep in mind, and in some cases it may be better to go with a personal loan instead of a balance transfer. Personal loans usually have fixed interest rates and a fixed payoff date. Another thing to keep in mind is that personal loans usually come with an origination fee, which can be as high as 6% of the loan. Having a personal loan compared to a credit card changes your utilization ratio as well. Using a personal loan can reduce your utilization ratio, which may benefit your credit score.
Transfer Fees
With many cards offering 0% interest rates, you’re probably wondering “What’s the catch?” Transferring your balance typically requires a transfer fee. Transfer fees are charged by the credit company you transfer the balance to, they are usually between 3-5% of the total balance. In some cases, you may have to pay more for the transfer fee than you would have for the original interest on low interest credit cards. Before transferring your balance, be careful to calculate how much you owe. You can calculate your transfer fee and compare your costs with this online calculator.
If you’re looking to reduce your costs or clear your debts, a balance transfer may be just the thing you need. Balance transfers offer a chance to pay your dues faster and with less pressure. Carefully calculate and consider whether a balance transfer is right for you. Based on your situation and what you’re transferring, there are several ways that you can profit from a balance transfer.
