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Debt consolidation loan vs. balance transfer credit card

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

Both debt consolidation loans and balance transfer credit cards can help you keep track of your debts and even pay them off more quickly. But not all forms of consolidating debt are created equal.

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 period of time.

See how top offers compare

Compare debt consolidation loan options

Rates last updated November 14th, 2018

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Name Product Product Description Min. Credit Score Max. Loan Amount APR
Monevo Personal Loans
Quickly compare multiple online lenders with competitive rates depending on your credit score.
550
$100,000
3.34% to 35.99%. (fixed)
LendingClub Personal Loan
A peer-to-peer lender offering fair rates based on your credit score.
660
$40,000
6.95% to 35.89% (fixed)
SoFi Personal Loan Fixed Rate (with Autopay)
No fees. Multiple member perks such as community events and career coaching.
680
$100,000
6.99% to 14.87% (fixed)
NetCredit Personal Loan
Check eligibility in minutes and get a personalized quote without affecting your credit score.
550
$10,000
34%–155% (Varies by state) (fixed)
Credible Personal Loans
Get personalized rates in minutes and then choose a loan offer from several top online lenders.
Good to excellent credit
$100,000
4.99%–36% (fixed)
Marcus by Goldman Sachs Personal Loans
Consolidate your debt or pay off large expenses with competitive rates and no fees.
Good to excellent credit
$40,000
6.99% to 24.99% (fixed)
Even Financial Personal Loans
Get connected to competitive loan offers instantly from top online consumer lenders.
580
$100,000
4.99%–35.99% (fixed)
Avant
Conveniently check your loan options without affecting your credit score.
580
$35,000
9.95%–35.99% (fixed)
OneMain Financial Personal and Auto Loans
An established online and in-store lender with quick turnaround times. Poor credit is OK.
Varies
$30,000
16.05%–35.99%* (fixed)

Compare up to 4 providers

Compare balance transfer credit card options

Name Product Filter values Introductory Balance Transfer APR APR (Annual Percentage Rate) for Purchases Annual Fee Minimum Credit Score
0% for the first 15 months (then 14.99% to 25.99% variable)
14.99% to 25.99% variable
$0
680
Earn a $150 bonus statement credit after you spend $1,000 on purchases in the first 3 months. Rates & Fees
0% for the first 15 months (then 14.99% to 25.99% variable)
14.99% to 25.99% variable
$0
680
Earn up to $250 back. Earn $150 back after you spend $1,000 or more in purchases with your new card within the first 3 months of Card Membership. Plus, earn an additional $100 back after you spend an additional $6,500 in purchases within your first 12 months. You will receive the cash back in the form of a statement credit. Rates & Fees
0% for the first 12 months (then 14.99% to 25.99% variable)
14.99% to 25.99% variable
$95
680
Earn $200 bonus cash back after you spend $1,000 on purchases in the first 3 months. Rates & Fees
0% for the first 12 billing cycles (then 13.99% variable)
13.99% variable
$0
720
A low, variable APR on purchases, balance transfers and cash advances.
0% for the first 15 months (then 14.99%, 18.99% or 24.99% variable)
14.99%, 18.99% or 24.99% variable
$0
680
Earn unlimited 1.5% cash rewards on purchases. See Rates and Fees.
0% for the first 18 months (then 12.99%, 16.99% or 20.99% variable)
12.99%, 16.99% or 20.99% variable
$0
680
An 18-month 0% Intro APR period on both purchases and balance transfers, plus zero foreign transaction fees, makes this is a strong well-rounded card. See Rates and Fees
0% for the first 15 billing cycles (then 16.99% variable)
16.99% variable
$195
715
Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
0% for the first 15 billing cycles (then 16.99% variable)
16.99% variable
$495
715
Mastercard Black Card members receive an annual $100 air travel credit toward flight-related purchases including airline tickets, baggage fees, upgrades and more.
0% for the first 15 billing cycles (then 16.99% variable)
16.99% variable
$995
715
Earn points every time you spend. Luxury Card enhances your purchasing power by providing you with one (1) point for every one dollar ($1) you spend. Every purchase gets you closer to the rewards you want.
9.95% for the first 6 months (then 17.99% fixed)
17.99% fixed
$39
350
Borrow up to $10,000 and get your credit score back on track.
8.90% to 25.90% variable
$0
630
This card offers the same low rate for purchases, cash advances and balance transfers.
0% for the first 15 months (then 14.99% to 25.99% variable)
14.99% to 25.99% variable
$0
680
Earn 10,000 Membership Rewards® Points after you use your new card to make $1,000 in purchases in your first 3 months.
0% for the first 15 months (then 16.99% to 25.74% variable)
16.99% to 25.74% variable
$0
680
Jumpstart your financial fitness! 60 day introductory balance transfer offer, save on interest, and get your free monthly credit score.
0% for the first 15 statement closing dates (then 14.99% to 24.99% variable)
14.99% to 24.99% variable
$0
680
Transfer high rate balances and save on interest with an introductory $0 balance transfer fee for the first 60 days your account is open. After that, the fee for future balance transfers is 3% (min. $10).
0% for the first 15 months (then 16.99% to 25.74% variable)
16.99% to 25.74% variable
$0
690
Earn 1.5% unlimited cash back for each dollar spent.
0% for the first 12 statement closing dates (then 15.24% to 25.24% variable)
15.24% to 25.24% variable
$0
720
Earn more cash back for the things you buy most.
NASA Federal Platinum Advantage Rewards Credit Card
NASA Federal Platinum Advantage Rewards Credit Card
7.9% for the first 90 days (then 11.9% to 17.99% variable)
11.9% to 17.99% variable
$0
670
Enjoy perks and save money while gaining points that never expire with every purchase.
10.99% for the first 6 months (then 24.99% variable)
24.99% variable
$0
300
2% Cashback at restaurants or gas stations on up to $1,000 in combined purchases each quarter. Plus 1% cash back on all other credit card purchases.
20.99% variable
$25
300
Establish credit history - with responsible use you may be upgraded to an unsecured credit card.
21.99% variable
$39
300
Help establish, strengthen - even rebuild your credit
20.99% variable
$29
300
Establish your credit and reap the benefits. Get worldwide purchasing power and flexibility as you work to build or re-establish your credit history.
24.99% variable
$0
300
Take control and build your credit with responsible use.
Aspire Platinum Mastercard®
Aspire Platinum Mastercard®
0% for the first 6 billing cycles (then 8.9% to 18% variable)
8.9% to 18% variable
$0
620
We'll help you score major savings with a 0% introductory APR* on purchases and balance transfers for 6 months.
1.99% for the first 6 monthly billing cycles (then 11.99% to 21.99% variable)
11.99% to 21.99% variable
$0
670
1% cash back to the nonprofits, K-12 schools, colleges and religious organizations of your choice.
22.97%, 24.97% or 26.97 variable
$39
630
Get unlimited 1.5 cash back on every purchase with no limit on how much you can earn, and no changing categories.

Compare up to 4 providers

How do debt consolidation loans and balance transfer credit cards work?

Quick snapshot: Debt consolidation loan vs. balance transfer credit card

Debt consolidation loanBalance transfer credit card
How it worksTake out a term loan, use it to pay off multiple debts, then repay your debt consolidation loan.Transfer your debts to a credit card and make monthly repayments until it’s paid off.
CostsAPR starting at 3.49% for duration of loan.0% introductory APR on transferred debt, around 16% to 26% APR on purchases, plus a 3% to 5% transfer fee and an annual fee of up to $100.
Repayment timeUsually between three and seven years.Indefinite, though introductory period typically lasts between six and 18 months.
What it’s great forPaying off a large amount of debt over a long period of time with a lower interest rate.Paying of debt quickly and avoiding paying interest.
Where it falls shortWon’t save you much if you have a small amount of debt you can afford to pay off in under a year.Interest rates can spike to around 18% after the introductory period is up.
Compare offers nowCompare offers now

Debt consolidation loan

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

Debt consolidation loans typically come with lower APRs than your original debts. You can sometimes find debt consolidation loans with APRs as low as 3.49%. Some debt consolidation loans also come with origination fees, usually between 1% and 3% of your loan amount. Lenders typically deduct the origination fee from your loan amount before you receive your funds, so make sure to ask for enough to cover your debts and the origination fee when applying.

Our complete guide on how debt consolidation loans work

Balance transfer credit card

A balance transfer credit card is another method of moving all of your debts into one place — this time a credit card. Once 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 one-time repayments on the balance transfer credit card.

These credit cards often come with 0% APR introductory rates, meaning that you don’t have to pay interest or fees for the first six months to 18 months after you take out the card. This introductory rate allows you to save big on interest if you can pay off all or most of your debt in that time frame. They also often charge a transfer fee, usually 3% to 5% of the transfer amount.

Our complete guide on how balance transfer credit cards work

When is a debt consolidation loan better than a balance transfer credit card?

Debt consolidation loans are often better when …

  • You have a large amount of debt. Balance transfer credit cards come with credit limits, so you might not be able to fit all of your debts on to one. Even balance transfer credit cards with the highest credit limit might not be able to cover large amounts of debt like private student loans or tens of thousands of dollars in credit card debt.
  • You can’t afford to repay your debt quickly. Debt consolidation loans give you more time to pay off your debt at a lower interest rate than balance transfer credit cards — meaning more affordable monthly repayments.
  • You’re willing to put up collateral. You can get even lower rates if you apply for a secured debt consolidation loan, which you back by putting something up for collateral.
  • You have bad credit. Qualifying for a balance transfer credit card with a credit limit high enough to repay your debts can be nearly impossible when you have a low credit score. You might have more success with a secured personal loan, which is generally a less expensive option for bad credit borrowers.

When is a balance transfer credit card the better option?

A balance transfer credit card might be a better option when …

  • You can afford to pay off your debt fast. You can save more with a balance transfer credit card than a debt consolidation loan as long as you repay your debt before the introductory period expires.
  • You’re consolidating credit card debt only. Balance transfer cards make the process seamless to pay off credit card balances from other issuers. Even though you can use a personal loan to consolidate credit card debt, you might find it simpler to transfer that balance to a new credit card.
  • You’re willing to spend the time applying for new cards. Even if you aren’t able to repay your debt by the time your introductory period is over, you can always apply for a new balance transfer credit card and start all over again. Keep in mind that you need to maintain a good enough credit rating to qualify for a new balance transfer card.

4 questions to ask when weighing both options

Ask yourself the following questions to decide which is better for your financial situation:

  1. How much debt do I have?
    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.
  2. How much can I afford to pay each month?
    Debt consolidation loans typically come with longer terms than balance transfer credit cards, making monthly repayments lower. Balance transfer credit cards can motivate you to get out of debt more quickly, however.
  3. How’s my credit score?
    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.
  4. Do I want another credit card?
    Balance transfer credit cards only come with minimum monthly payments. You’ll have to do the math and stick to a personal plan to pay off your debt at once. Debt consolidation loans do that work for you, giving you one less thing to worry about.

Case study: Mindy gets out of debt

Say there was a woman named Mindy. After college, her bills started becoming more and more difficult to keep track of as her balances grew. She also had a small procedure at a hospital and owed a couple thousand dollars in medical bills.

Her total debt added up to $11,000 with an average APR of 15%. She had a credit score of 790 — excellent credit — and expected to qualify for most loans.

She applied to prequalify for a balance transfer credit card and a personal loan that could be used for debt consolidation. Here’s how the offers compared:

Debt consolidation loanBalance transfer credit card
Time to pay off debt3 years12-month introductory period
Loan amount/credit limit$11,000$15,000
APR6.03%0% for introductory period, 18% after
Monthly payment$334.64$953.33 to pay off debt before intro period
FeesNo upfront feeBalance transfer fee of 4% ($440)
Total interest/fees$1,047.09$440

Though the balance transfer credit card was less expensive in the long run, Mindy couldn’t afford to pay over $950 a month to make that introductory period. She knew she could potentially cut this amount in half by applying for another balance transfer credit card before here limit was up. But she wasn’t willing to spend the time applying for another balance transfer credit card later.

Based on these two factors, she chose the debt consolidation loan.

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 organizing a small amount of debt that you can afford to pay off over a short period of time.

Frequently asked questions

Anna Serio

Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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