Is balance transfer an effective debt management tool? 

Hi my name is Ka Hoe and I’m the founder of J Advisory. So today I’m back with more of a question rather than a misconception because recently I did a (now rename to workshop) and this was one of the things that we covered. So what do you think? Is balance transfer an effective management tool to solve your debt problem or relieve debt problem? 

Personally, I feel that balance transfer is not an effective debt management tool. 

Normally the tenure is so short, it can be like, 3 months, 6 months, 9 months, that you can hardly do anything other than just buying time, right? You don’t effectively solve the problem. So imagine the amount of work you have to do in order to apply for a balance transfer. You know what that situation where the Chinese used to say? You have 10 holes but you only have 9 covers so there is not enough cover to cover the holes. Holes being the loan right? 

So, balance transfer is really that kind of analogy where effectively, you’re just trying to move that loan to somewhere else temporarily, you don’t continue to manage your spending, eventually you have your 11 holes or the 12 holes which then you’ll be trying to manage and balance transfer more, right? Which doesn’t really solve the problem because eventually there comes a time where it needs to be repaid, but you do not have the funds to repay it for. 

Is the bank helping you with the longer period for the balance transfer? 

So did you also know that recently in my 1 to 1, I met somebody who shared with me, there was a new product. Now balance transfer can do up to 36 months maximum, now it’s like WOW. This is interesting because during my time, not that I’m very old, balance transfers used to be 3 months, 6 months, 9 months, the maximum I think I’ve seen is 12 months. For it to be 36 months right now, I think really the situation is very bad, or either that the banks have gotten more creative. Maybe trying to earn more interest income from you. 

But again, 3 years is still a very short time to effectively manage anything. I guess that’s one of the reasons why I never apply for balance transfer because it doesn’t really solve the problem in the long run. So what do you think? Let me know in the comment section if you successfully used balance transfer to get out of your debt situation, I’ll be happy to hear from you. Take care guys.