Trimming excess debt with credit balance transfers and personal loans

Household budgets have been stretched like never before.  First it was the drought pushing prices up, then it was the petrol crisis and then the financial crisis.  Australians have had to take on more debt than ever intended, to survive these difficult times. Now that we seem to have most of these crises behind us, credit card debt is being addressed and a lot of people are looking at a credit card balance transfer or a personal loan to manage their debt.

Debt consolidation

Debt consolidation has been recognised as a major problem as people try to come to terms with mounting debt.  So what are some of the issues that a consumer needs to look at before they can make a decision about whether to get a personal loan or a balance transfer to manage their debt:

• Spending habits
• Continued overspending
• Not paying monthly repayments on time
• The ability to repay debt
• The amount that can be committed to repayment each month

By understanding the answers to these questions you will have a better understanding of how you are going to manage any arrangement that you make.

Generally speaking there is not a lot of difference between the two methods over the same period of time for the same amount of money, but where the difference lies is that a credit card will become expensive if the repayments are not met, or not met on time.  Each situation would need to be evaluated to see the difference.

It is not such a bad thing to have set repayments as in the personal loan, because that means you will pay off the balance which you may be tempted not to do if you take the credit card balance transfer option.

Personal Loan

One of the major differences with a personal loan over a credit card balance transfer is the fact that a personal loan has a set period of time that the loan has to be paid off and a set monthly repayment that has to be met.   Any default on this can be very expensive.

The idea of a personal loan is that you take out a loan for a fixed amount of money and you have a fixed instalment that you have to pay off each month.  This can be difficult for some people who do not have the willpower to repay debts on time, but it is a plus in that you have to stick to the arrangement and that can get the debt paid off for you.

Credit Card Balance Transfers

This seems like a good solution but it does require a commitment to pay off at least the monthly payment on time.  The down side of a balance transfer is that by only paying the monthly balance it will take many more years to pay off the debt and in the long run a lot more interest will be paid.  This can be avoided if the transfer is only relatively small, but with a larger balance transfer you are probably in a better situation than before the transfer, but the debt still needs addressing to bring it down.

If you don’t make your repayments on time or you miss a repayment the overall cost of a credit card over the years will be much higher than if you had taken a personal loan.

If you do have a credit card debt problem, talk your options over with a financial institution and see what offers they may have for helping with your situation.

>> Compare personal loans

>> Compare 0% balance transfer cards

Check out today's featured offers:

Westpac Low Rate	Citibank Clear Platinum	Qantas AMEX Discovery	ANZ Platinum
0% p.a. for 6 months on purchases & balance transfers	2.9% p.a. for 12 months on balance transfers	$0 annual fee Up to 10,000 Bonus QFF Points	0% p.a. for 6 months on purchases & balance transfers

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Popular Credit Card Offers

			Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
	Westpac Low Rate Card - 0% Offer	A credit card with a low rate offer on both balance transfers and purchases, plus a low annual fee.	0% for 6 months (reverts to 13.49% )	0% for 6 months	$45	21.49%
	Citibank Clear Platinum Card	Competitive interest rate on purchases and balance transfers offer.	11.99%	2.9% for 12 months	$99	21.74%
	St George Vertigo	Take advantage of this great offer from St.George with a low rate on purchases and a low balance transfer offer.	13.24%	0.99% for 12 months	$55	21.49%
	ANZ Platinum Credit Card	An introductory interest rate offer on balance transfers and purchases, plus a $0 first year annual fee.	0% for 6 months (reverts to 19.24% )	0% for 6 months	$0 annual fee for the first year( $87 thereafter)	20.99%