Both balance transfers and personal loans offer low interest rates, so they can help you restore your finances to a healthy, debt-free state if need be. The idea is to use them to pay off credit card balances before you get drowned in interest charges.
For balance transfers, the core characteristic is an interest-free period (typically six to 12 months) to pay back the amount you borrowed. You don’t have to pay a fixed amount each month, but you do have to complete repayment for the entire amount by the end of the interest-free period. If you fail to do so, the outstanding amount gets converted into a balance on your credit card, which translates into high interest charges.
Personal loans are more straightforward. You’ll simply make a fixed payment every month for an agreed duration until you pay back the principal amount plus interest owed. The duration of your loan, monthly payment and any applicable service charges are communicated to you when you apply.
As long as you stick to your monthly payments, there’s no danger of incurring higher interest and you can pay off your loan at a fixed rate. However, if you miss payments, you will be charged late fees.
Balance transfers are good if you prefer not to commit to a lengthy repayment period, but you run the risk of inheriting a balance if you do not clear the entire amount within the interest-free period. If you need more time to pay the loan back, stick with personal loans instead.