|by Mr Credit Card|
What happens when you have bad credit and want to transfer a balance to another credit card with either a 0% APR or at least one with a lower interest than you are presently paying?
This is a really tricky issue because there are a few solutions depending on your situation. They range from just transferring a balance to a card without a zero interest deal or as a last resort, going to peer to peer lending institutions. But first, let’s go through all the scenarios for someone looking to do a balance transfer.
Scenario 1: You Have High Balance But Good Credit – This is the ideal situation. You are presently carrying a high balance and are looking to pay off your debt faster and/or lower your interest payment. For those with good credit scores, getting a
Your Credit Is Borderline Fair – mid 600s and You Cannot Get A 0% BT Deal – Do not get me wrong. You may be able to get a 0% BT deal even with a 600ish score (it really depends on what’s in your credit report). But in the event that you cannot get a 0% deal, what do you do? Well, if you have several credit cards, you could transfer the ones from the card with the highest interest rate to cards with lower interest rates. You may not get 0% and pay zero interest for a short period, but you will still end up paying a lower interest that if you stuck with your high interest card. This is probably the best course of action if you cannot get a great BT deal.
Another alternative would be to apply for a no annual fee credit card and hope to get a lower interest that you are presently paying. Then simply transfer the balance to the new card. They key question is what type of cards tend to accept folks with not so stellar credit. Well, airline and frequent flier credit cards is one route to go. Yes, you probably have to pay an annual fee. And you definitely will not get any 0% deal. The interest rate will most likely be at the mid teens. But if this is viable, transferring a balance this way is not such a bad deal. Plus, you may actually get some nice bonus miles!
Your Credit is Really Bad and You Cannot Get Approved For a regular unsecured card – If you have run out of existing credit cards to transfer your balance, then perhaps, the best alternative is not to consider credit cards at all. You would most likely already to paying high double digit interest rates. One alternative that has not been explored often enough is using peer to peer lending. There are services like prosper.com or lendingtree.com which connects you to other people who want to earn a slightly higher interest than what banks give them.
With these services, you have to tell the lender the reason you are borrowing the money and your income. Bear in mind that you are not guaranteed a much lower rate than you are already paying at the moment. But I’ve known more than a few folks who could not get approved for credit cards but have successfully gotten loans from peer to peer lending firms at much lower rates than their existing credit cards.
Summary – To conclude, you do not need perfect credit scores to get a 0% balance transfer card. But the lower your score, then the higher the chance that you have to settle for a non zero interest balance transfer deal. For those cannot get approved for a credit card, resorting to peer to peer lending firms may be a viable alternative to lowering your interest payments.