Advantages of Personal Loans | Balance Transfer v/s Personal Loan

Loans | Personal Loans
by Priyadarshini 15 March 2023

Which is Better, a Balance Transfer or a Personal Loan?

Balance transfers and personal loans can both buy you time to pay off your credit card debt and keep interest rates from spiraling out of hand. Personal loans, unlike balance transfers, do incur interest, albeit at far lower rates than credit cards. In this blog, we discuss the advantages of personal loans. 

Which Choice is Better for You?

It is determined by various factors, including:

  • The amount of your loan
  • How long will it take you to pay it off?
  • Cost total (processing costs + interest)

Loan Amount

Before approving a balance transfer, the issuing bank checks at your credit limit with them. This is typically 2X to 4X your monthly income (2X if you earn less than $30,000 per year; 4X if you earn between $30,000 and $120,000 per year). So, if you make $3,000 per month, your credit limit is $12,000. If your credit card debt exceeds this limit, you will be unable to obtain a balance transfer for the total amount.

Repayment Period

Balance transfers are primarily short-term loans, with the longest length being 18 months. However, you must be committed to adhering to the payback schedule or you may find yourself in hot water all over again. If you’re not sure you’ll be able to repay your obligations in full within 18 months, consider a personal loan instead. Personal loan terms are longer, ranging from one to seven years, making your monthly payments more bearable. Of course, the longer the loan term, the higher the interest rate.

Total Cost

If both a balance transfer and a personal loan are viable options, you’ll need to do the arithmetic to determine whether it’s cheaper to pay the processing charge for a balance transfer or the total amount of interest over the duration of a personal loan.

Which balance transfer rate in Singapore is the best in 2022?

Here are the current prices for 6-month and 12-month balance transfers offered by banks. All charge a processing fee but provide 0% p.a. interest, so that’s what we’re comparing:

Standard Chartered now has the lowest fees for 6-month balance transfers, at 0% p.a. + 1.5 percent processing fee.

If you are not a current Citibank customer, the next best option for 6-month balance transfers is Citibank. They charge new customers 0% p.a. plus a 1.58 percent fee.

UOB is the most cost-effective alternative for 12-month balance transfers, charging 0% p.a. + $4.28 percent transaction fee.

If you don’t want to go with UOB, the next best options are Standard Chartered, OCBC, or DBS, all of which offer 12-month balance transfers at 0% p.a. + 4.5 percent processing fee.

This guide will help you determine the advantages of personal loans so that you make a better decision while choosing between a personal loan and a balance transfer plan. 

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