An excellent article on The Los Angeles Times‘ Money Talk section explores the issue of balance-transfers. One strategy for debt management and paydown is the zero-percent balance transfer. Balance transfers can be effective in a debt elimination plan if the interest rate is low and it is feasible to pay off the transferred amount before the honeymoon period ends: it allows existing debt to be frozen at a low or zero percent rate while an aggressive debt reduction schedule is implemented.
But given the steady tightening of lending standards from credit card companies, what are your alternatives if balance transfers are no longer an option?
The balance transfer strategy in a debt elimination plan also allows you to buy time to make critical adjustments to accounts in preparation for debt paydown, to free up resources that may not be liquid for debt payments, and to reduce the average interest rate paid on a debt amount — depending on the time it takes you to repay that debt account. Along these lines, consider:
- calling up lenders and ask them to freeze or temporarily lower interest rates
- borrowing from a low or zero interest source of money to quickly pay off credit card account balances with extremely high interest
- calling up lenders and asking about plans for people with debt problems that involve an immediate end to credit card use with a freeze in the debt account moving forward
- making structural changes in your expenses: relocating to a cheaper place to live if renting; finding a cheaper way to get to and from work; and cooking all meals at home until the debt is completely paid off
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: credit card balance transfers, debt elimination without balance transfers, debt reduction without balance transfers, zero percent balance transfers
