Balance transfers: Are they right for you?

Balance transfers are a type of short-term loan ranging from 3 to 12 months, which typically offer 0 per cent interest rate with a one-time processing fee or administration fee.  

A distinguishing feature of a balance transfer is the low minimum repayment amount required each month, typically ranging from 1 per cent to 3 per cent of your loan amount, with the remainder payable only in the final month. 

The relatively low cost, combined with lower monthly repayments, means users experience less financial burden monthly. This allows users some time to save up over the tenure of the balance transfer loan to pay off the remaining balance in the final month.

‍

It is a tool that can be tapped upon during periods of limited cash flow. This includes using balance transfers to pay off outstanding bills which may have a higher interest cost. 

• For example, the revolving interest rate on credit cards tends to be high, making balance transfer a useful tool for users to reduce the burden of higher interest payments during periods of low liquidity while maintaining the discipline of monthly repayments. 
• Additionally, some users may leverage the low monthly repayment commitments to maximise the outcomes for their business ventures/ side-gigs or even daily needs and emergencies while allowing their savings to remain invested until it is the right time for them.

‍

How do balance transfers work? 

Let’s say you decide to apply for the GXS FlexiLoan Balance Transfer, one of the loan types you can draw from your GXS FlexiLoan account. (Expert tip: GXS FlexiLoan account is a standby line of credit from which you can borrow either a Balance Transfer or an Instalment Loan whenever you need.) 

‍

This can be a useful option if you are looking to:

• Conserve cash for other purposes as balance transfers allow you to make smaller repayments each month. With the GXS FlexiLoan Balance Transfer, your minimum monthly repayment amount is small (from as low as 1 per cent!) and you repay the remaining outstanding only at the end of the loan tenure. 
• Enjoy 0 per cent interest. This means no interest on your loan amount as long as you pay on time!
• A low, one-time processing fee from 1.35% (EIR 4.13 per cent p.a.*). That's it. No other fees, no surprises.
• Select from a loan tenure of 4-12 months.

‍

Let’s break it down for you and apply some numbers to see how this could look**: 

• Loan principal (i.e. the amount requested by you): S$10,000 
• Selected tenure: 4 months 
• One-time processing fee: 1.35 per cent (EIR 4.13 per cent p.a.*) 
• Minimum percentage payable each month except for the final month: 1 per cent

‍

Month 0: S$9,865 disbursed to you (the one-time processing fee is deducted upfront)

Month 1 repayment: S$100 (the 1 per cent minimum payable monthly)

Month 2 repayment: S$100

Month 3 repayment: S$100

Month 4 repayment: S$9,700 (the remaining balance of your loan)

‍

By the way, do note you can draw a GXS FlexiLoan Balance Transfer only once, unless otherwise allocated by the bank.

‍

Balance transfer and instalment loan: Which is best for you?

Here are three considerations you should ask yourself when deciding between the two: 

1. What’s your repayment style?
2. How quickly can I repay my loan or balance? 
3. How much am I requesting for? 

‍

Your repayment style: 

If you prefer to have consistency in your monthly repayments from start to end, an Instalment loan might be the better option. Instalment loans offer a predictable schedule of equal monthly payable each month. You can choose to draw an Instalment loan from your GXS FlexiLoan account. 

While if you prefer to have a lower repayment commitment each month and you are able to save up/ have clarity that there will be some funds coming in later, balance transfer might be the loan for you. GXS balance transfer, like the example above, reduces the burden of monthly repayment until the final month where the remaining amount is due. 

‍

How quickly can I repay my loan: 

Instalment loans tend to offer a longer tenure - for as long as 60 months. GXS FlexiLoan offers a flexible loan tenure of 2 - 60 months to suit your budget. Unique to GXS Bank, instalment loans enjoy interest savings if you choose to repay early. No early repayment fees apply. 

Balance transfers on the other hand are usually shorter, GXS balance transfer offers a tenure from 4 to 12 months. 

‍

How much am I requesting for?: 

You know your financial abilities best but as a general rule of thumb, if you know you can pay off your transferred balance within a shorter period of time, a balance transfer might be a better choice for you at a relatively low cost to Instalment loans. 

Meanwhile, for larger sums, a personal loan may be a better option as it offers a longer loan tenure, meaning you are able to space out your monthly repayments over a longer period.

‍

Find out more about your options and be sure to check out the T&Cs that apply before committing to a loan. 

‍

*Effective Interest Rate (EIR) for Balance Transfer is calculated with an average loan amount of $10,000, with a 4-month repayment period, from 1 Jan 2024 and a minimum monthly due of 1% of loan principal.

**Figures are illustrative only and actual rates and figures may differ from what is shown in your GXS Bank app. 

‍