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Debt consolidation loan vs. balance transfer credit card

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

Updated

Fact checked

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

Data indicated here is updated regularly
Name Product Filter Values APR Min. Credit Score Max. Loan Amount
Credible personal loans
4.99% to 35.99%
Fair to excellent credit
$100,000
Get personalized rates in minutes and then choose an offer from a selection of top online lenders.
SoFi personal loans
5.99% to 18.53%
680
$100,000
A highly-rated lender with competitive rates, high loan amounts and no fees.
Upstart personal loans
8.69% to 35.99%
580 or 600 depending on state of residence
$50,000
This service looks beyond your credit score to get you a competitive-rate personal loan.
LendingTree personal loans
Starting from 3.99%
Good to excellent credit
$50,000
Receive up to five loan offers in just minutes through LendingTree's simple online form.
NetCredit personal loans
34% to 155%
No minimum
$10,500
Check eligibility in minutes and get a personalized quote without affecting your credit score.
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Compare balance transfer credit card options

%
Name Product Amount saved Balance transfer APR Balance transfer fee Recommended minimum credit score Filter values
Citi® Diamond Preferred® Card
0% intro for the first 18 months (then 14.74% to 24.74% variable)
$5 or 3% of the transaction, whichever is greater
740
An impressive 18 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® 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
740
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.
Luxury Card Mastercard® Titanium Card™
0% intro for the first 15 billing cycles (then 14.99% variable)
$5 or 3% of the transaction, whichever is greater
700
Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
TD Cash Credit Card
0% intro for the first 15 billing cycles (then 12.99%, 17.99% or 22.99% variable)
$5 or 3% of the transaction, whichever is greater
680
3% on dining and 2% on groceries make this a valuable card for food purchases. Use it while traveling, too, with no foreign transaction fees. Available in: CT, DC, DE, FL, MA, MD, ME, NC, NH, NJ, NY, PA, RI, SC, VA, VT
CardMatch™ from creditcards.com
See issuer's website
300
Use the CardMatch tool to find cards you're likely to qualify for with your credit score, without a hard pull on your credit.
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Balance transfer cards vs. debt consolidation loans

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

Balance transfer credit cardDebt consolidation loan
APRLow or no interest on transferred debt within an intro period, and typically 15.99% to 25.99% thereafterFrom 3.99% to 35.99% depending on your credit profile
Payoff timeIntro periods can range from 1 to 2 years, after which your APR reverts to a higher purchase rateGenerally 3 to 7 years
FeesTypically 3% to 5% of each transferred balanceTypically 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.

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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