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Debt consolidation loan vs. balance transfer credit card

Which can save you the most and make paying off debt easier?

While debt consolidation loans work well for reining in large amounts of debt, balance transfer credit cards can help you save even more if you can afford to pay off all of your debts over a short interest-free period.

See how top offers compare

Compare debt consolidation loan options

Name Product Filter Values APR Min. Credit Score Loan Amount
BHG personal loans
$20,000 – $200,000
A highly-rated lender with quick turnaround and reliable customer service.
Credible personal loans
2.49% to 35.99%
Fair to excellent credit
$600 – $100,000
Get personalized rates in minutes and then choose an offer from a selection of top online lenders.
Best Egg personal loans
5.99% to 29.99%
$2,000 – $50,000
A prime online lending platform with multiple repayment methods.
PenFed Credit Union personal loans
5.99% to 17.99%
$600 – $50,000
With over 80 years of lending experience, this credit union offers personal loans for a variety of expenses.
SoFi personal loans
4.99% to 19.63%
$5,000 – $100,000
A highly-rated lender with competitive rates, high loan amounts and no fees.

Compare up to 4 providers

Compare balance transfer credit card options

Name Product Amount saved Balance transfer APR Balance transfer fee Minimum Credit Score Filter values
Citi® Diamond Preferred® Card
0% intro for the first 21 months (then 13.74% to 23.74% variable)
$5 or 5% of the transaction, whichever is greater

Best of Finder 2021

An impressive 21 months intro APR on balance transfers and purchases, as well as no annual fee make this one of the top 0% APR cards available.
Citi Simplicity® Card
0% intro for the first 21 months (then 14.74% to 24.74% variable)
$5 or 5% of the transaction, whichever is greater
With an intro APR of 21 months, this card has one of the longest balance transfer offers on the market. Plus, no late fees and no annual fee.
Citi® Double Cash Card
0% intro for the first 18 months (then 13.99% to 23.99% variable)
$5 or 3% of the transaction, whichever is greater
Get a strong 18 month 0% intro APR on balance transfers AND up to 2% back. This is a rare card that offers both rewards and balance transfers.
Citi Custom Cash℠ Card
0% intro for the first 15 months (then 13.99% to 23.99% variable)
$5 or 5% of the transaction, whichever is greater
A new cashback card that automatically awards 5% to your highest eligible spending category each billing cycle, on up to $500 (then 1%).
Citi Rewards+® Card
0% intro for the first 15 months (then 13.49% to 23.49% variable)
$5 or 3% of the transaction, whichever is greater
Get a strong 15 month 0% intro APR on balance transfers AND up to 2x points. This is a rare card that offers both rewards and balance transfers.

Compare up to 4 providers

Balance transfer cards vs. debt consolidation loans

Here’s how balance transfer credit cards compare to debt consolidation loans.


Low or no interest on transferred debt within an intro period, and typically 15.99% to 25.99% thereafter

From 3.99% to 35.99% depending on your credit profile

Payoff time

Intro periods can range from 1 to 2 years, after which your APR reverts to a higher purchase rate

Generally 3 to 7 years


Typically 3% to 5% of each transferred balance

Typically no upfront fees, though lenders may charge origination fees of 1% to 5% of the loan amount

Impact on credit score

  • Short-term drop in score due to hard credit pull
  • Potential increase in credit score over time if you keep your other cards open to maintain low credit utilization
  • Short-term drop in score due to hard credit pull
  • Likely to increase credit score in the long run since other credit balances are paid off with the loan

Pros and cons of both options

Balance transfer
  • As low as 0% interest on your debt
  • Can consolidate multiple cards and save on interest and fees
  • Some cards come with rewards and perks
  • You may not be approved for the full amount of credit you need to pay off your debt
  • The rate only applies for a limited time
  • If you don’t pay off your entire balance within the promotional period, you could face interest rates as high as 22%
Debt consolidation loan
  • Allows you to pay off your entire debt within the loan term
  • You can consolidate multiple debts, including credit cards and personal loans
  • You can use the loan for additional purposes if you apply for an amount higher than your outstanding debt
  • Interest rates are higher than the balance transfer credit card
  • Depending on the loan you apply for, you may not be able to make additional repayments or pay off the loan early without penalty
  • You will be in debt longer as most loans come with minimum loan repayment terms terms of at least a year

Which debt consolidation option is right for me?

Debt consolidation allows you to combine all of your current debts into one so that you have only one monthly payment to keep track of. The right option can also help you save on interest payments and pay your debt down faster.

Balance transfer credit card

When you sign up for a balance transfer credit card, your creditor pays off the balances of your debts, which can include credit cards, personal loans, medical bills and more. Then you make monthly payments on the balance transfer credit card.

A balance transfer credit card is best suited to borrowers with good credit who are looking to pay off a small amount of debt as quickly as possible.

These credit cards often come with 0% APR introductory rates, meaning that you don’t have to pay interest or fees for the first 6 to 18 months after you take out the card. However, not all balance transfer credit cards start at 0%, and many also often charge a transfer fee, which is usually 3% to 5% of the total transfer amount.

Debt consolidation loan

A debt consolidation loan is a fixed-term personal loan that you take out to pay off multiple debts, typically personal loan and credit card debt. You then pay off your debt consolidation loan plus interest and fees with one monthly repayment.

A debt consolidation loan is best suited to borrowers with larger debts who need more time to pay them off. Applicants with good credit will receive the best rate, but competitive rates are also available for applicants with low credit scores who are willing to put up collateral.

Debt consolidation loans typically come with lower APRs than your original debts, though they may come with origination fees, usually between 1% and 3% of your loan amount.

Compare options

What to consider when comparing these two options

When deciding which option to choose, consider:

  • Interest rates. If you can pay the debt off in the introductory period, a balance transfer credit card will have a lower interest rate. If not, you’ll get a lower APR with a debt consolidation loan.
  • Monthly payments. Debt consolidation loans typically come with longer terms than balance transfer credit cards, making monthly payments lower.
  • Fees. Balance transfer cards tend to have higher fees than consolidation loans.
  • Limits. Debt consolidation loans pack the biggest punch for large amounts of credit debt. Balance transfer credit cards are generally better for smaller amounts due to credit limits and short 0% introductory periods.
  • Exclusions. Both options can come with exclusions, such as not accepting medical or student loan debt. Check for exclusions before signing up.
  • Credit. While you need strong credit to qualify for a balance transfer credit card or debt consolidation loan with competitive terms, there are more options for people with less-than-stellar credit in debt consolidation loans.
  • Extra features. Some balance transfer credit cards come with rewards programs that let you earn points on new purchases.

Which option is better for my credit score?

It depends on how much debt you have — for large debts, a debt consolidation loan will be better, but if you have a small debt you may be better off with a card. Both options will cause an initial dip in your credit score when the lender does a hard check. Once you’re approved:

  • Balance transfer credit card. As you approach your credit limit, your credit utilization ratio — the ratio of how much credit you have available to how much you’re using — will go up, lowering your credit score. However, as you pay your card off, that ratio will go back down, raising your credit.
  • Debt consolidation loan. A debt consolidation loan doesn’t count as revolving credit, meaning your credit utilization ratio doesn’t change and there’s a less drastic impact on your credit. However, the debt will take longer to pay off, and future lenders will be able to see it on your credit report.

Bottom line

If done right, both debt consolidation loans and balance transfer credit cards can help you organize your debt and save on interest. Debt consolidation loans are generally better for people with large amounts of debt that don’t mind paying a little more in the long run for lower monthly payments. Balance transfer credit cards are often best for a small amount of debt that you can afford to pay off over a short period of time.

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