Key Takeaways
- Balance transfer enables you to merge the unpaid amounts on your credit cards into a solitary card, usually with the advantage of a more favourable interest rate.
- Balance transfers benefit those with good credit scores who need more time to pay off high-interest debt.
- Balance transfers may not be the best option if you can’t repay the debt within the promotional period or have a high debt-to-service ratio.
Have you ever wondered, “What is balance transfer?” It could be the solution for you if you’re struggling to keep up with multiple credit card payments and high interest rates.
In this article, we explore what a balance transfer is, how it works in Malaysia, and whether it might be the right choice for your financial situation.
What is Balance Transfer?
Balance transfer plans allow you to consolidate your outstanding balances from various credit cards onto a single card, simplifying your repayment process and potentially saving you money on interest.
During the introductory period of 6 to 12 months, its primary advantage of lies in the lower interest rate offered on the transferred debt.
How Does a Balance Transfer Work in Malaysia?
If you’re considering a balance transfer in Malaysia, it’s essential to understand the process first and foremost.
- Step 1: First, you’ll need to apply for a new credit card from a different bank that offers a balance transfer facility.
- Step 2: Once approved, specify the amount you wish to transfer from your old cards to the new one up to the allowed limit.
- Step 3: Your new card provider will then pay off the outstanding balances on your old cards, effectively transferring the debt.
- Step 4: Instead of juggling multiple cards with varying interest rates, you can now focus on repaying the transferred amount in fixed monthly instalments at a reduced rate.
Some balance transfer plans even offer 0% interest during this time, providing a significant advantage for paying down your debt.
Is a Balance Transfer Right for Me?
Balance transfers can help those grappling with credit card debt regain financial control, but they’re not the best choice for everyone.
If you’re looking to prolong the repayment period and your credit rating is satisfactory, considering a balance transfer card with an introductory 0% annual percentage rate could be wise.
This is because such a card can offer significant savings on interest, aiding in more efficient debt clearance.
However, if you are unable to settle your debts within 6 or 12 months and end up with another credit card, be aware of the processing fees associated with balance transfers.
If balance transfers aren’t feasible, consider a personal loan to pay off debts, especially if your credit card usage is below 70%.
This solution presents an opportunity for streamlined handling of your financial commitments.
Why Was Your Bank Loan Application Rejected in Malaysia?
Applying for a bank loan in Malaysia can be challenging, and several factors might lead to rejection:
1. Credit Issues
- CTOS score below 550: Banks consider this a high-risk indicator.
- Late payments: More than two months overdue within the last six months.
- Special Attention Account (SAA): Flagged accounts.
- Trade references: Exceeding RM1,000.
- Legal issues: Including bankruptcy.
2. Income Factors
- Recent employment: Less than six months at your current job.
- Income in cash: Unverifiable income.
- No EPF contributions: Employment without EPF contributions.
- Contract or freelance work: Considered unstable income.
3. High Debt-to-Service Ratio (DSR)
- DSR over 70%: Monthly instalments exceeding 70% of net income make approval unlikely.
In situations like these, bankers cannot assist clients in securing a loan. Applying to these circumstances would not only waste time but could also worsen your financial record.
If rejected, you must wait six months before reapplying to the same bank, and each application can lower your CTOS score by 30 to 50 points.
Moreover, a CTOS score below 550 leads to immediate rejection by some banks.
Read more: How to Pay Off Debt: Effective Ways to Pay Off Debt Fast
Bluebricks’ Loan and Consultancy Services
In summary, balance transfers can be a useful tool for managing multiple high-interest credit card debts in Malaysia.
By understanding how they work and seeking professional advice when needed, you can make well-informed informed choices to improve your financial well-being.
As a prominent bank loan and debt consolidation agency in Malaysia, Bluebricks offers an extensive array of bespoke financial solutions, such as:
- Personal loan services
- SME loan services
- Mortgage loan services (to purchase a new home, refinancing and cashback purposes)
- Collateral loan services
Our experts also provide tailored advice catered to your unique circumstances, considering factors like:
- Required loan amount.
- Urgency of the need.
- Property ownership duration.
- Income level.
- CTOS score, including credit score and history.
Why Bluebricks
1. One of the Top 10 Leading Loan Agencies in Malaysia
Our loan agents represent both individuals and businesses, offering technical financial advice to help secure loan approvals. Even if banks have previously rejected you, we provide access to a broad spectrum of loan options. Our aim is to enhance the success rate of your loan applications and minimise rejections.
2. Over 10 Years of Experience
With over a decade of experience and current banking knowledge, we excel in securing personal, business, mortgage, and collateral loans, navigating challenges like CTOS/CCRIS, and guiding clients confidently towards successful loan approvals.
3. One-Stop Solution
We provide a one-stop loan service, compiling various options from banks and credit institutions for you. Simply submit your income statement, assets, liabilities, employment record, and credit history, and we’ll handle the collateral and documentation to streamline your loan approval process.
4. Full Financing with 100% Bank Loans
We ensure 100% bank loan availability to provide full financial support, making it easier to achieve your goals and build a positive credit history.
5. No Upfront Payment Required
Our no upfront payment policy is designed to ease your financial journey, allowing you to start your investment without initial costs, reducing immediate burden and demonstrating our commitment to your satisfaction and trust.
