Make the 0 APR on Balance Transfer System Work for You

2007-03-08 10:33:40

( Financial )



There are offers to manage your debt through offset mortgage plans, debt reduction schemes, and balance transfers, among others. Of the three, the offer for a 0 apr on balance transfers for a fixed period of time is the ideal solution if you heed the agreement and understand the terms from the obvious clauses to the most obscure ones.

Offset mortgage plans give you the opportunity to combine your mortgage loan, among others, with your current or savings account. This allows your savings to work for faster repayment of your loans. However, an offset mortgage entails that you cannot go below your savings minimum or your interest payments will go up again.

Debt reduction gives you the option to undergo credit counseling and settle with your creditors for an amount less than your full debt. This process, however, is long and tiring. This is also not helping your credit score any.

The 0 apr on balance transfer offer, however, will allow you to make the most impact against your loans. Balance transfer is one of the various forms of debt consolidation where you can transfer all your debts into one account and make just one payment monthly. Credit cards usually do this to win customers from other card providers. Thus, the pot is sweetened by giving a 0 apr on balance transfer for a number of months; some are offered 15 months of interest-free payments.

Through a 0 apr balance transfer deal, your payments make more headway in depleting your principal. But be sure to check how long you are getting a 0 apr on balance transfer before signing up for one. The longer the period, the better it is, of course. You should also make sure of the credit limit available on the card. The more there is, the better the deal. You should also read the balance transfer agreement to see how you could maintain the 0 apr on balance transfer. Some offers explicitly state that one late payment can put you in default, making you lose your promotional rate and thus phenomenally increasing your interest rates.

You should also take note of the regular interest rate for your loan. This is important, especially if you believe that you cannot pay off your balances by the end of the introductory offer.

Finally, if you used a credit card for the 0 apr on balance transfer offer, it would be better to keep that card strictly for balance transfers. Balance transfers are usually a different category of balances on a credit card. If you use your credit card for purchases, you will cheat yourself out of all your benefits because generally, money you pay to the account is used first to pay the balances with the higher interest rate. Thus, whatever you pay on your bill is applied first to the purchases you made before being applied to your balance transfer, which usually has the lower interest rate at 0.


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