Spoiled for Choice – Loan or Balance Transfer?
Considering the vast, staggering world of choice we are faced with every day, being torn between debt solutions is not an unusual pickle to find oneself in these days.
Naturally, this big decision requires careful consideration, especially for those who have mouths to feed. In the very troubled economic times we are living in, making the wrong financial decision is really not a mistake one can afford to make anymore.
Debt consolidation can streamline your financial affairs, thereby saving you time and money, while also removing the risk of skipping payments or developing stress-related illnesses. Monthly hand-to-mouth living is a problematic condition, which is becoming all too prevalent among mid to low-income households.
There are two kinds of debt consolidation and, the fact of the matter is, one may be better for you than the other. That’s why it’s essential that you understand what’s cooking with regards to each of these options, to allow for a well-informed selection that’s not only to your taste, but will nourish every aspect of your life too.
Unsurprisingly, many indebted individuals have a distaste for the word, ‘loan’. If you are one such person, hearing the expression may be enough to make you slowly back away from an imaginary credit card, steaming out the words, ‘swipe me’.
Before your noodle makes the jump from the term ‘loan’, to the notion of the quickest way to land oneself in hot water, take a few minutes to peek into the kitchen and see what debt consolidation loans are really made of.
A consolidation loan can be better described as a loan blender, wherein debts are popped and combined into one smooth, simple repayment step. As opposed to the protracted, convoluted process of paying off a mixed bag of odds and ends – debts of different shapes and sizes, with an irregular assortment of interest rates, terms and requirements.
This technique requires the lender to give you a nice, big loan, so you can dissolve all of those varied little high-interest debts, such as store cards, personal loans, car finance, and what have you. In so doing, you’re essentially kneading your debts into one pleasing doughy ball. What this really means is that you’ll only have to make one reduced payment to one lender monthly, at a lower interest rate!
The Balance Transfer
This is the other type of debt consolidation. For this option, you’re going to need to have a good credit score of more than 650 points, which will qualify you for a balance transfer card. How it works is, you simply transfer the balance of your debts to your balance transfer card. This is essentially a credit card, which you pay off monthly as normal.
What makes this financial recipe different is that you can extend your credit line beyond the amount that you owe. In this way, you can cultivate a wholesome credit record for yourself, even while paying off debts.
The Secret to Financial Success
However, just how healthy either of these options will turn out to be for you finances will depend heavily on your self-control over your appetite for spending. Debt consolidation will only prove fruitful if you are disciplined about paying in your monthly instalments and resisting the temptation to splurge on expensive treats.
So, if you feel you can stand the heat that comes with a balance transfer, dig in. Otherwise, opt for a consolidation loan and nurture yourself back to glowing financial health in this manner. Either way, it’s going to require sticking to a recipe of being frugal and making good on your payments!