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Whenever a person gets a loan, he needs to repay the loan amount together with the interest within a stipulated time. Financial institutes have the option of transferring loans from one account of higher interest rate to another account with a lower interest rate. This facility is called balance transfer. Balance transfer is very popular among debtors as it allows them to avail loans at lower interest rates.
Benefits of balance transfer
1. Makes loans easier to repay as the loan amount gets less costly because of lower interest rates.
2. Offers greater grace period for loan repayment.
3. Helps in decreasing the loan amount.
4. The borrower gets more time to repay his loan.
How can 0% balance transfer help in clearing credit card debts
1. Before applying for 0 percent balance transfer, read carefully the terms and conditions for balance transfer to the new account.
2. Get hold of information`s like the grace period offered for the other account and if it will actually benefit you. The other factor that needs to be made sure of is the fact that the privilege of zero percent transfer on the balance loan amount is awarded for how many months.
3. There are companies that charge fees for balance transfer and others that allow transfer of balance only on limited amounts of money. It is best to have a look at these conditions as it might ultimately prove costlier than expected in making a balance transfer.
4. Check the credit history before applying for a balance transfer. Remember the greater number of credit lines opened in your name, the lower your credit score will be.
5. Try paying your balance as soon as possible. Most financial institutes have an introductory offer for zero percent interest on balance transfer for a certain period of time. It would be best to repay the loan within this period.
6. Some banks charge a penalty fee when the balance of a loan is transferred to another account with a lower interest rate, at the end of the grace period. A fine understanding of the terms and conditions will reveal the amount of penalty charged.
Balance transfer can be used to decrease one`s loan burden. The only condition for this is that the debtor must have a good hold on the different aspects of zero percent balance transfer, and use it to his benefit. Simple steps with planning can make balance transfers useful in eradicating credit card debt.