Let us say I have $10k in a high interest debt. Or even some money I need to borrow for expenses. I am unable to clear the $10k in one payment and so putting it on a credit card won't make sense. Overall goal: Minimize the overall interest/fee or payment on top of the borrowed principal.
In the last 3 years I had leveraged balance transfer offers (For ex, I had 2 credit card (call them
C2) promos for 0% APR and 0% fee for 15-18 months. I had one for 1% transfer fee call this
C3 and one for 4% transfer fee, call this
C4 case I transferred $25k with a 18-month 0% APR offer at 4% fee. I cleared it all by 18 months and I was feeling proud of not having borrowed using a Personal Loan (most of which start at about 6%) because my goal was to pay the least interest on the overall debt.
Ever since, I have been defaulting to the balance transfer route when I needed money. I was recently trying to find formulas for calculating effective interest paid on personal loans to cross-check if my approach is right. I understand that usually balance transfer offers are under 18 months and so not all amounts can be managed this route.
So let me try an apples-to-apples comparison. If I have an offer for balance transfer with a fee of 4% for 18-months and on the other side I have a personal loan offer with APR of 4% for 18-months, which one should I take.
I referred to a formula in this answer - https://money.stackexchange.com/a/64675/80804 and put it in a spreadsheet. I was surprised to see that the interest paid on loans was less than the balance transfer fee.
Did I make a mistake in those past offers? And going forward, should I abandon Balance transfer options? Is the formula correct? Are these merely theoretical comparisons but not practical (for ex, I haven't seen 2% APR or loans with terms less than 2 years).