Balance Transfer Loans

When it comes to money, even carefully planned steps may need some revisiting and adjusting in the future. It’s impossible to account for every single outcome when you make decisions in advance, so unexpected events are possible.

Do not worry, though; instead of hoping everything will go in your favor, you can handle potential challenges by strategizing around them beforehand, and addressing them with a calm manner once they do occur.

If you find yourself dealing with multiple debts at a time, options may seem to be running dry. However, there are things you can do to make the most of the situation, wrap up the debt, and continue going in the right direction.

One possibility to consider is a balance transfer loan. A balance transfer loan is intended to help you address a number of debts at once, including a variety of credit cards, and some personal loans you may have taken in the past.

If you plan payments out correctly and pay them off in a particular time window, your overall interest rate could stay fairly low, and your expenses could turn out to be much lower than you may have initially expected.

Apart from balance transfer, you may have heard of cash loans, debt consolidation, and many other similar-sounding solutions. We will clear out any questions you may have, and explain the differences between these terms.

What Are Balance Transfer Loans?

Balance transfer loans are specifically designed to help you pay all debts you may have at once. The process is pretty straightforward: you get a loan, list the creditors that need to be paid, and the amount each one should get. After you’ve covered all the eligible creditors, the rest of the loan goes to your account.

Balance transfer loans usually have a low annual percentage rate (APR) that doesn’t change over time. They have fixed monthly payments and don’t revolve around debt, which differentiates them from credit cards.

Besides the typically lower interest rates, balance transfer loans are distinct from cash loans in that the money goes directly to creditors, whereas a cash loan is deposited entirely into your account. If you take a loan intended for a hefty purchase and don’t plan to use this money to settle debt, a cash loan may be more suitable to your needs.

Further, what’s distinct and noteworthy regarding balance transfer loans are the characteristic “grace periods.” This interest-free period usually lasts up to 12 months after you first get your loan, a time during which you are required to put down monthly payments without the addition of any other expenses apart from the one-time processing fee.

Essentially, if you can pay off the entire loan in that time window, this option could prove very beneficial, as you can avoid higher-interest rates later on.
In contrast, a debt consolidation plan would have to be paid with interest the entire time, but its interest rates would likely be lower than that of a balance transfer loan after the grace period ends. Hence, debt consolidation stands as a potentially better choice if you intend to pay it off gradually over an extended period.

When it comes to the amount of money you owe to loaners, there are limits to how much you can pay through a balance transfer loan. Additionally, some creditors can’t be paid using this method.

Which Debts Are Eligible For Balance Transfer Loans?

A maximum of twelve different loans can be paid through balance transfer. However, the following ones never make the cut:

  • Mortgage loans
  • Auto loans
  • Student loans

Different lenders will have their own sets of rules and regulations you are expected to abide. Other personal loans and credit cards typically fall under the eligible category, but this can vary between specific creditors.

To ensure what you can cover via balance transfer matches your needs, double-check the options with the creditor before signing any papers. Having a professional by your side will make it easier to scout the best offer and avoid misunderstandings.

How Long Does It Take For Lenders to Receive Balance Transfer Payments?

It will take a couple of days for your creditors to receive the payments. Until you get a confirmation that your debt has been sorted out, it’s best to keep up with regular payments.

Even if you pay off the complete sum, in case it arrives late, it could result in additional charges and penalties. There’s no need to risk it; any extra money you may have sent will be refunded.

Depending on the manner in which you sent the payment to your lenders, the delivery date will vary:

  • An electronic payment may take from three to five workdays
  • Check payment can take up to ten business days
  • Payment processing may require up to three additional days