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Balance Transfer vs Debt Consolidation in Malaysia

Key Takeaways

  • When navigating multiple debts, the discussion between balance transfer vs debt consolidation is very common.
  • Benefits of balance transfer include avoiding high-interest charges and paying down the principal faster.
  • Benefits of debt consolidation loans include lowered fixed interest rates and predictable budgeting.
  • Choose a balance transfer if you can repay the debt within the 0% interest period.
  • Choose a debt consolidation loan for larger debts or if you prefer fixed payments.

When managing multiple debts in Malaysia, two popular strategies can help simplify your financial life: balance transfer vs debt consolidation.

Each has its own set of perks and works differently, so it’s important to know which one fits your needs best.

In this article, we outline the differences between balance transfers and debt consolidation and how to determine which option is best for your financial situation.

Pros of Balance Transfers in Malaysia

1. Avoid High-Interest Charges

    Balance transfers enable borrowers to avoid high-interest charges on their transferred balance during the 0% introductory period. This makes paying off what you owe easier without accruing additional interest.

    2. Simplify Repayment

    With balance transfers, you only need to make a single monthly payment, thus reducing the stress of managing multiple due dates and amounts.

    3. Pay Down Principal Faster

    You can set aside more funds to pay down the principal of your debt with the money saved on interest charges

    As a result, you can become debt-free faster, ultimately saving more money in the long run.

    Pros of Debt Consolidation Loans in Malaysia

    1. Lower Fixed Interest Rates

      Combining high-interest credit card debt into a loan with a lower fixed rate can save you money on interest payments.

      It makes your debt more manageable and reduces the overall cost of repayment.

      2. Simplified Repayment

      Instead of juggling multiple credit card bills, a debt consolidation loan allows you to manage just one monthly payment.

      Like balance transfers, this can help reduce stress and make it easier to keep track of your finances.

      3. Predictable Budgeting

      With fixed interest rates and repayment terms, debt consolidation loans offer predictability.

      Knowing exactly how much you need to pay each month helps with budgeting and financial planning, giving you better control over your finances.

      Read more: What is Personal Loan Default Malaysia & How to Avoid It

      Balance Transfer vs Debt Consolidation in Malaysia: Key Differences

      AspectBalance TransferDebt Consolidation Loan
      How It WorksInvolves moving existing debt to a new card (with 0% introductory APR).Involves applying for a new loan to pay off existing debts.
      Interest RateIndividuals can enjoy 0% interest for a promotional period, and then the standard rate applies.Borrowers benefit from a fixed interest rate for the entire loan term.
      Repayment TermBalance transfers offer a limited introductory period followed by ongoing repayments.A debt consolidation loan includes a fixed repayment term based on the loan amount.
      FeesTypically involves a balance transfer fee of 1 to 3% of the transferred amount.May include a loan origination fee, which can vary by bank.  
      Debt EliminationBorrowers are still responsible for paying off the transferred balance after the promotional period ends.Borrowers need to repay the loan principal and interest over the fixed term.

      By comparing these key differences, you can better determine which method meets your financial goals and situation.

      Balance Transfer vs Debt Consolidation: How to Choose?

      Balance transfer vs debt consolidation loan in Malaysia, here’s how you can decide which option might be best for you:

      1. Balance Transfer

        Opt for a balance transfer if you have manageable debt and can repay it within the 0% interest period.

        2. Debt Consolidation Loan

        A debt consolidation loan is right for you if you have more debt or prefer fixed payments.

        3. Consult a Financial Advisor

        For tailored advice, consult a financial advisor in Malaysia. They can help you assess your options and make the best choice for your situation.

        Read more: Debt Consolidation Malaysia: Unlock Your Home Equity to Consolidate Debts

        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 Does Credit Card Debt Relief in Malaysia Work?

        Bluebricks’ Loan and Consultancy Services

        Bluebricks is a leading bank loan and debt consolidation agency in Malaysia that offers a broad range of financial solutions, for example:

        We also provide tailored advice to find the best solution for your situation, 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.

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        Picture of Wilson Wai Kit

        Wilson Wai Kit

        Senior Consultant

        With extensive banking experience, notably as a mortgage sales officer at UOB Bank, Wilson leverages his understanding of loan applications and approvals to offer financial insights and support to empower individuals to make informed decisions regarding their financial futures.

        Feel free to contact him for assistance with your financial needs!

        I want to know about bank loans
        Picture of Wilson Wai Kit

        Wilson Wai Kit

        Senior Consultant

        With extensive banking experience, notably as a mortgage sales officer at UOB Bank, Wilson leverages his understanding of loan applications and approvals to offer financial insights and support to empower individuals to make informed decisions regarding their financial futures.

        Feel free to contact him for assistance with your financial needs!

        I want to know about bank loans

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        About Bluebricks

        BlueBricks Holding is one of the top ten leading loan agency companies in Malaysia in terms of loan approval rates. As a leading loan agency company, we have extensive knowledge and experience in mortgage, personal loans, and business loans, and this enables us to help our customers to get the deal that is best suitable to them.

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