- Savings on Interest Expenses: The actual annual interest rate on most credit cards is generally over 30%, and if you only make minimum payments, the interest is calculated on a compounding basis, and the repayment period becomes long and uncertain. In comparison, the actual annual interest rate of a balance transfer loan is lower, ranging from about 5% to 19%, and the loan interest is calculated using the reducing balance method, with a relatively short repayment period, which helps people with credit card debt to regain financial freedom quickly.
- Reduced Repayment Pressure: The repayment period of this type of debt consolidation loan is also more flexible, allowing customers to tailor a repayment plan for their credit card debt according to their personal financial needs and circumstances, such as extending the repayment period to reduce the total monthly repayment amount and ease the monthly repayment pressure.
- Assistance with Cash Flow Management: Some balance transfer debt consolidation loans also offer cash withdrawal services, which allow customers to withdraw additional cash for emergency use even when repaying credit card debt and other debts.
- Convenience: As this type of debt consolidation loan helps consolidate and repay different credit card debts and loans in one place, customers only need to deal with debt repayment at one bank or financial institution, making the process simpler and avoiding the risk of penalty for forgetting different debt repayment dates.
- Improved Credit Score: Debt consolidation loans can help improve credit scores by consolidating and repaying different credit card debts and loans, thus avoiding a decrease in credit score due to default on different debts. If customers can repay on time, their credit score may gradually improve.
- Balance transfer: Primarily aimed at debt repayment, this loan method usually involves depositing the loan amount directly into the designated credit card or loan account, or sending a cashier's check to the customer for them to repay their credit card balance or debt on their own. However, some banks now offer debt consolidation loans combining repayment and cash-out loans, allowing customers to have additional funds for cash flow while repaying their debts.
- Personal instalment Loan: A loan for personal use, which can be used for various purposes, such as home renovation, travel, or education. The loan amount is usually determined based on the borrower's creditworthiness, and the loan is disbursed in a lump sum to the borrower's designated bank account.
- Increase income and reduce expenses: Increasing income and reducing expenses can effectively ease the burden of debt repayment and avoid adding new credit card debts, helping to shorten the repayment period.
- Reduce credit limit: Reducing unnecessary expenses by lowering your credit limit can help curb excessive spending and strengthen consumption control.
- Credit card instalment plan: Applying for a monthly statement instalment plan allows for repayment over a period of up to 36 months, reducing the pressure of lump-sum debt repayment. Although there may be handling fees involved, it is still more cost-effective compared to paying only the minimum payment.
- Tax loans: Many banks or financial institutions offer low-interest tax loans during the tax season (October to April of the following year). The annual interest rate is generally lower than regular loans. If your debt repayment coincides with the tax season, you may consider using this type of loan to help pay off your credit card debts.