Personal Loans or Balance Transfer Cards: Which Is Right for You?

Compare two ways to consolidate debt: a personal loan or a balance transfer credit card.

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Personal loans for debt consolidation and balance transfer credit cards are two common strategies that can lower the amount of interest you owe and help you pay off debt faster and more simply.

A key difference involves how many debts you want to turn into one. Debt consolidation loans are typically larger sums used to combine several debts, while balance transfers usually pay off smaller balances on one or two high-interest credit cards.

A rolls multiple debts into a single monthly payment that you pay over a fixed period, typically two to five years. These loans can have lower interest rates than most credit cards, which allows you to save money on interest over the life of the loan.

A involves moving high-interest credit card debt to a new credit card that charges 0% interest for a period of time, usually 12 to 18 months.


Obtaining a debt consolidation loan or balance transfer credit card depends in part on your credit score. People with good or excellent credit (690 or higher on the FICO scale) have more options than those with bad credit (629 or lower on the FICO scale), and their interest rates will be lower.



Consolidating can be an effective way to get a handle on your debt. But it won’t address spending habits that led to getting a debt consolidation loan or balance transfer card. Establishing that includes money for things you want as well as debt payments can help you keep spending in line.

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Even more important is to avoid running up large balances on the credit cards you’ve paid off. A debt consolidation loan or balance transfer card won’t be helpful if it ends up breaking your budget and pushing you further into debt.

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