Balance Transfer Card or Personal Loan: Which Is Right for You?

Compare two ways to consolidate debt: a balance transfer credit card and a personal loan.
Jackie Veling
By Jackie Veling 
Edited by Kim Lowe

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

But how do you choose between a balance transfer card and a personal loan? Ask the following questions to determine how to best pay off your debts.

How to choose between a balance transfer card and a personal loan

When choosing between a balance transfer credit card and a personal loan for debt consolidation, there are four main questions to ask yourself. 

1. What type of debt do you have?

The type of debt you have may help you determine which product is the best fit. 

For example, a balance transfer card works by letting you move high-interest credit card debt to the new credit card, but you can’t transfer other types of debt. 

A debt consolidation loan has more flexibility. You can use it to pay off multiple types of unsecured debts, including credit cards, medical bills, payday loans and existing personal loans.

2. How much debt do you have?

How much money you owe — and how long it will take to pay it off — is another important consideration.

A balance transfer card will likely have a lower credit limit than a loan, so it’s best for smaller debts. A balance transfer card comes with a promotional APR of 0% for a limited period of time, usually from 15 to 21 months. You’ll want to make sure you can pay off your debt within that initial period when you'll be charged no interest.

A debt consolidation loan has a longer repayment period, usually from one to seven years, and many lenders offer high loan amounts, sometimes up to $50,000. Though you won’t save as much money on interest, a debt consolidation loan is usually a better fit for people with higher debt who need more time to pay it off.

🤓Nerdy Tip

If you’re not sure how much debt you have, you can enter your current balances, interest rates and monthly payments in a debt consolidation calculator to get the full picture.

3. Which product can you qualify for?

Balance transfer cards and debt consolidation loans have different qualification criteria, though both look at your overall credit, so check your credit score before applying.

Borrowers with good to excellent credit (690 credit score or higher) may qualify for both a balance transfer card and a debt consolidation loan. If you have fair or bad credit (689 credit score or lower), you may only be able to qualify for a loan. Consolidation loans are available to borrowers across the credit spectrum.

Depending on the lender, you may be able to pre-qualify for a loan, which means you can check potential loan terms without hurting your credit score.

See if you pre-qualify for a personal loan – without affecting your credit score
Just answer a few questions to get personalized rate estimates from multiple lenders.

4. What are the costs?

Finally, compare the costs of consolidating with each product. Though balance transfer cards come with a promotional 0% APR period, some charge a balance transfer fee, which is typically 3% to 5% of the total amount transferred.

Debt consolidation loans charge 6% to 36% APR, depending on your credit profile, debt-to-income ratio, desired loan amount and repayment term. Some lenders also charge an origination fee that covers the cost of processing your loan. This is an upfront fee that ranges from 1% to 10% of the loan amount. 

Keep in mind that even with these fees, a balance transfer card or debt consolidation loan may have a lower APR than your current debts, so you can still save money.

Balance transfer vs. personal loan

Balance transfer card

Personal loan

Type of debt

  • Best for paying off credit card debt only.

  • Best for paying off credit card debt or multiple types of unsecured debt.

Amount of debt

  • Best for smaller debts that can be paid off within the promotional period, usually 15 to 21 months.

  • Best for larger debts that may take one to seven years to pay off.

Qualification criteria

  • Available to borrowers with good to excellent credit (690 credit score or higher).

  • Available to borrowers across the credit spectrum, including those with fair or bad credit (689 score or lower).

  • Ability to pre-qualify with some lenders.


  • Includes zero-interest promotional period.

  • May charge 3% to 5% balance transfer fee.

  • Includes fixed monthly interest.

  • May charge 1% to 10% origination fee.

Consolidating your debt successfully

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 balance transfer card or debt consolidation loan.

Establishing a realistic budget can help you keep spending in line; the budget should include debt payments as well as money for things you want to buy.

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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