Debt consolidation loan vs. balance transfer credit card | finder.com
Woman reading about consolidation loans and balance transfer cards

Debt consolidation loan vs. balance transfer credit card

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.

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

Updated May 24th, 2019
Name Product Filter Values Minimum Credit Score Max. Loan Amount APR
550
$100,000
3.99% to 35.99%
Quickly compare multiple online lenders with competitive rates depending on your credit.
680
$100,000
5.99% to 16.24%
No fees. Multiple member perks such as community events and career coaching.
640
$40,000
6.95% to 35.89%
A peer-to-peer lender offering fair rates based on your credit score.
Good to excellent credit
$100,000
5.34% to 35.99%
Get personalized rates in minutes and then choose a loan offer from several top online lenders.
620
$50,000
7.99% to 35.89%
Affordable loans with two simple repayment terms and no prepayment penalties.
550
$100,000
3.84% to 35.99%
Get connected to competitive loan offers instantly from top online consumer lenders.
550
$10,000
34% to 155% (Varies by state)
Check eligibility in minutes and get a personalized quote without affecting your credit score.
640 FICO®
$35,000
5.99% to 29.99%
A prime lender with multiple repayment methods.

Compare up to 4 providers

Compare balance transfer credit card options

Name Product Intro Balance Transfer APR Balance Transfer Fee Recommended Minimum Credit Score
0% for the first 15 months (then 15.24% to 26.24% variable)
$5 or 3% of the transaction, whichever is greater
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 14.24%, 20.24% or 25.24% variable)
$10 or 4% of the transaction, whichever is greater
670
An 15 months 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 months (then 17.24% to 25.99% variable)
$5 or 3% of the transaction, whichever is greater
670
Earn 3% cash back on all purchases in your first year up to $20,000 spent. After that earn unlimited 1.5% cash back on all purchases.
0% for the first 15 months (then 15.24% to 26.24% variable)
$5 or 3% of the transaction, whichever is greater
680
Earn a $150 statement credit after you spend $1,000 or more in purchases with your new card within the first 3 months of card membership. Rates & fees
0% for the first 15 months (then 17.24% to 25.99% variable)
$5 or 3% of the transaction, whichever is greater
670
0% intro APR for 15 months from account opening on purchases and balance transfers.
0% for the first 12 months (then 15.24%, 19.24% or 25.24% variable)
$10 or 4% of the transaction, whichever is greater
670
Earn unlimited 1.5% cash rewards on purchases. See Rates and Fees.
0% for the first 12 months (then 15.24% to 26.24% variable)
$5 or 3% of the transaction, whichever is greater
680
Earn $250 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 16.24% to 25.74% variable)
$5 or 3% of the transaction, whichever is greater
670
When you spend $500 on your card within the first 90 days, you’ll receive a $150 cash back bonus. Rates & Fees
0% for the first 15 billing cycles (then 17.24% variable)
$5 or 3% of the transaction, whichever is greater
670
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 17.24% variable)
$5 or 3% of the transaction, whichever is greater
740
Earn 2% point value when redeemed for airfare or cash back through the Luxury rewards program.
0% for the first 15 billing cycles (then 17.24% variable)
$5 or 3% of the transaction, whichever is greater
700
Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
1.99% for the first 6 monthly billing cycles (then 16.24% to 22.24% variable)
$10 or 5% of the transaction, whichever is greater
670
1% cash back to the nonprofits, K-12 schools, colleges and religious organizations of your choice.
0% for the first 12 months (then 15.15% to 25.15% variable)
$5 or 3% of the transaction, whichever is greater
580
Earn $150 in statement credit after you spend $1,200 on purchases within the first 90 days from account opening.
9.95% for the first 6 months (then 17.99% fixed)
$10 or 3% of the transaction, whichever is greater
300
Borrow up to $10,000 and get your credit score back on track.
7.9% for the first 90 days (then 12.15% to 17.99% variable)
None
670
Enjoy perks and save money while gaining points with every purchase.
10.99% for the first 6 months (then 25.24% variable)
3%
580
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.
Aspire Platinum Mastercard®
Aspire Platinum Mastercard®
0% for the first 6 billing cycles (then 8.9% to 18% variable)
$5 or 2% of the transaction, whichever is greater
580
Enjoy a 0% introductory APR on purchases and balance transfers for the first 6 months.

Compare up to 4 providers

Balance transfer cards vs. debt consolidation loans

ProsCons
Balance transfer credit cards
  • 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 loans
  • 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.

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.

Frequently asked questions

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site