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The differences between personal loans and balance transfers
The differences between personal loans and balance transfers
Get familiar with these tools to better manage long-term debt repayments.
Throughout our lives, spending big can often become a necessity, where finding funds to finance our lifestyles or pursuits might pose an obstacle.
But whether it's making a big purchase, paying for home renovations, or simply managing your long-term loans, knowing the options available to you goes a long way in helping you plan better financially.
Here, we're taking a look at two of them, Personal Loans and Balance Transfers, exploring their benefits so you can make a more informed decision that aligns with your personal needs and goals.
While both offer distinct advantages, each of them caters to different financial needs. Before we begin, let's take a quick look at what they are, and how they work.
What is a Personal Loan?
A quick look:
- Fixed repayment up to 60 months
- Fixed interest rate; doesn’t move with the market
- Approvals are dependent on your available credit card limit and credit worthiness, no collaterals required
What is a Balance Transfer?
A quick look:
- Intended to allow you to borrow a sum to pay off the outstanding amount on your other bank’s credit cards, but the funds disbursed can be used to directly pay for your expenses
- Approvals are dependent on your available credit card limit and credit worthiness, no collaterals required
When will you need them?
Both Personal Loans and Balance Transfers can offer significant assistance with debt management, but they do function a bit differently. Depending on the scenario, you may decide to choose one over the other.
| Personal Loans | Balance Transfers |
| Helpful in funding the purchase of essential large household items that are costly – such as refrigerators, ovens, or sofas – which will be used over a long period of time | May be suitable for covering the shortfalls with bills for big life events, such as weddings or welcoming a newborn |
| For occasional expenses such as minor home improvement works that can’t be charged to your credit cards | Can be used to help pay for big ticket purchases accumulated on other bank’s credit cards, such as holiday bookings |
| The fixed repayment terms make it easier to budget and manage hefty expenses such as car or household repairs | Offers assistance during emergencies, e.g. when large unforeseen expenses exceed your emergency fund |
Remember to consider your needs and objectives before choosing either option. Balance Transfers can make debts more manageable through consolidation and offer more flexibility in terms of repayment, while Personal Loans might be more appropriate when larger sums and fixed regular payments are preferred.
Now that you have a better understanding of these two debt management tools, take a closer look at what Secured and Unsecured Loans are, or even Can Debt be Good or Bad?
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