Personal Loan Or Debt Consolidation?
An increasing number of consumer loans are being taken out by consumers who are keen on consolidating their debt. Debt consolidation is a system by which all or most outstanding debts are repaid by borrowing from one lender. People with good credit scores are eligible for a balance transfer credit card. The advantage of transferring one’s balance to a credit card is that they may avoid paying interest for two years or so. For e.g. HSBC credit card offers 0% interest for a period of two years and a transfer fee of 3.3% with a standard rate of 17.9%. This option is good for people who are keen to payback their fast quickly. It is important to note that this method is favorable for those who are able to pay off their debts within the interest free period else they might start attracting steep interest rates. This type of balance transfer is however only available for those who have good credit scores and are able to pay the high balance transfer fee.
Using a personal loan is also a common method of consolidating one’s debt. Debt consolidation through personal loans is suited for those who can make fixed monthly payments. The advantage of this method is that debt amount is fixed; unlike a credit card one can easily spend more money. Personal loans are offered for about 6% APR. However a little research can help find lenders who would be willing to waiver a part of the interest or even completely in certain cases. The advantage of debt consolidation through this method the monthly payments are fixed and one is definitely making inroads into the debt burden. The downside of this method is that one might end up paying more interest when compared to a balance transfer credit card. A good evaluation of one’s repayment capability can help pick the best option.