Fast Personal Loans

Do you have a loan with a high interest rate you’re trying to pay off? Is it frustrating you to see so much of your monthly payment going toward interest instead of principal?

If you’ve been looking for solutions, chances are you’ve come across 0% interest balance transfer offers from credit card companies. What you might not be aware of is that you can use these offers to pay off personal loans and student loans – not just other credit card debt.

How a Balance Transfer Works

Is the concept of a balance transfer new to you? Here’s a quick example of what it looks like:

You have a $2, 000 balance on Credit Card A with a 15% APR. You get a 0% APR balance transfer offer from Credit Card Company B.

You can transfer the $2, 000 from Credit Card A onto Credit Card B (you may incur a balance transfer fee, depending on the offer), and pay 0% APR for a select period of time instead of the 15% APR you were paying.

Note that you’re not actually completely paying off your debt. The balance from Credit Card A might be paid off (thanks to Credit Card B), but you’re still on the hook for repaying the $2, 000 you transferred to Credit Card B. Balance transfers simply mean you’re shuffling your debt around to a lower interest rate in order to pay it down faster, not eliminating it with the move.

Many credit cards offer 0% APR periods from 12 to 18 months, with some even over 20 months. Why bother with a balance transfer? You’re saving money because you’re paying less interest. With a 0% APR, your payments go directly toward the principal of the balance.

There is one catch, though – you must be able to pay off the balance by the time the 0% APR promotion expires.

We used credit cards in this example, but the same holds true for other loans. If you have a personal or student loan, you can transfer that debt to a credit card with 0% interest while paying off your original personal or student loan. Let’s take a look at how this is possible.

How to Pay Off a Loan With a Balance Transfer

Before you consider using this strategy, you should have a decent credit score; at least 700 and above. People who have been completely responsible with credit in the past (they haven’t missed any payments, and can afford to pay extra) would be the best candidates for this strategy. They simply have debt that’s costing them too much.

You can use a variety of methods to transfer a balance: you can call the credit card company offering the 0% APR promotion and inquire about it; you can log onto your account online if you already have a card with an offer; or you can use a balance transfer check that was mailed to you to write a check to yourself, and receive the funds in your bank.

Just beware, if you log into your account for an offer, it likely won’t be the most competitive option on the market. Instead of getting 0%, you might get 5% APR or something similar. The best offers come when you actually move your debt from one bank to another.

Warning before you proceed. Different lenders have different policies on whether or not you can pay using a credit card. Check with your lender first to see what payment options are available to you. A balance transfer check may be the only option for you.

Calling a credit card company may be the best idea as you can ask the representative questions about fees and the overall process. You can also attempt to negotiate the balance transfer fee. That might sound a little crazy, but Sandy Smith of Yes I am Cheap has successfully negotiated her balance transfer fee down a few times and highly recommends others do the same. You have nothing to lose by asking.

What happens after you write a balance transfer check? Once the check is cashed, the balance is drawn from your credit card. If you have a limit of $10, 000 on your credit card, and you write a check for $5, 000, you’ll then owe $5, 000 on your card. It’s very similar to a “traditional” balance transfer.

In some cases, you may be able to call a representative from the credit card company and give them the loan account information. They can then initiate the pay off and transfer on their end, with the same result of your credit line being drawn upon.

Please be wary of using balance transfer checks as there can be a lot of hoops to jump through. Some credit card companies won’t send you balance transfer checks, even if you call and request them, until months after you’ve been approved for the card. Unfortunately, balance transfer offers typically expire after 60 days, so this might not work out.

Others have had trouble cashing the checks. If you’re considering using a balance transfer check, read the fine print to make sure the math works in your favor, as some have higher balance transfer fees than credit cards.

Interesting facts

• Montello Bridging Finance is a real estate bridging finance company based in London, run by parent company Montello Capital Partners, which is also the asset manager for the Montello Income Fund. The Montello Income Fund is a real estate bridging finance fund that is focussed on lending against the residential property market in the United...