Balance Transfer Credit Cards vs Personal Loans

Three ways to consolidate and pay off debt are a balance transfer credit card, a personal loan, or a combination of the two. Which option is best depends on the type and amount of debt you have and your ability to pay off that debt over time.

For instance, a balance transfer credit card might be a smart choice if you have good credit and debt across a few credit cards and are prepared to pay the debt off within the next 12 to 18 months. On the other hand, a personal loan might be better if you have multiple high-interest debts and need more time to pay them off.

Read on to learn more about the choice between a balance transfer or personal loan, how a personal loan works, the pros and cons of each option, and how to leverage the benefits of both.

What Is a Personal Loan?

A personal loan is a lump sum borrowed from traditional banks, credit unions, or online lenders that you agree to pay back over time, with interest. The borrower will make regular payments, usually on a monthly basis, to the lender over a fixed period of time until the loan is repaid.

Unlike many other types of loans, personal loans can be used for just about anything. Often, these loans are used to resolve short-term cash flow problems, cover unexpected expenses during an emergency, or pay for large expenses.

Personal loans for debt consolidation involve a borrower taking out a personal loan and using it to pay off balances on high-interest credit cards and other debts. Because personal loans typically have lower interest rates than credit cards, the borrower can potentially save money while paying off their debt.

Though there are different types of personal loans, they’re most often unsecured loans. This means they’re not backed by collateral as, say, a mortgage is backed by the borrower’s house. As such, the lender will usually assess your creditworthiness and financial situation when determining whether to approve you for the loan.

Recommended: Check Your Personal Loan Rate

What Is a Balance Transfer Credit Card?

A balance transfer credit card is a credit card that allows you to transfer balances from other accounts. Let’s say an individual has outstanding balances on three or four high-interest credit cards. They could transfer that debt to a balance transfer credit card that charges a lower or even 0% annual percentage rate (APR).

If a lower rate is offered, it will usually last for a limited period of time — 12 to 18 months is the norm. Should that person pay off their debt within that window, they could save money on interest and have all of their payments go directly toward paying down the principal. After the promotional period ends, however, the interest rate could be quite high, usually higher than the interest rate on a personal loan.

Recommended: Debt Consolidation Loan vs Personal Loan

Balance Transfer vs Personal Loan for Debt Consolidation

When deciding on either a balance transfer credit card or personal loan for debt consolidation, consider the level of debt you have and your capacity for monthly payments.

A balance transfer credit card might be the right choice if you’re confident you can pay off your debt within the low-APR introductory period. However, a personal loan might be the better choice if you find it difficult to resist spending on a credit card, or if you have debt that needs to be paid off over a longer period of time. Personal loans are also preferable if you want a fixed interest rate and would like to know ahead of time how much your monthly payment will be, as it’s going to be the same each month.

Either way, debt consolidation is often a good idea, as it can reduce the overall amount of interest that consumers pay and help clear debt more expediently.

Balance Transfer Credit Card vs Personal Loan
	Balance Transfer Credit Card	Personal Loan
Types of Debt You Can Consolidate	•   Generally best for credit card debt	•   Good for multiple types of debt
Interest Rates	•   Can offer a lower intro APR, after which the rate will likely be higher than a personal loan •   Generally a variable rate	•   Tends to have lower rates compared to credit cards •   Typically a fixed rate
Fees	•   One-time balance transfer fee that’s usually 3% to 5% of the amount transferred	•   One-time origination fee ranging from 0% to 8% of the loan amount
Repayment Terms	•   Promo APR offers generally limited to 18-21 months	•   Can have terms up to 84 months or longer
Payments	•   Make only the minimum required payment	•   Fixed payments over a set period of time, with a predetermined payoff date
Credit Score Requirements	•   Generally need at least good credit (670+) to qualify	•   Better rates and terms reserved for those with good credit
Credit Score Impacts	•   Might increase credit utilization, which can negatively affect credit	•   Might lower your credit utilization, which can help credit

How to Decide Between a Balance Transfer and a Personal Loan

As you explore a balance transfer vs. personal loan, there are some important considerations. As noted above, if you don’t feel you can pay off your debt within the 12- to 18-month low-interest window that most balance transfer cards permit, you may want to pursue a personal loan. Consider the size of your debt and the amount you would be allowed to transfer to a balance transfer card. If you owe more than you can comfortably pay in a year, a personal loan could be the better option.

Do the Math to Compare Your Options

Restructuring debt with personal loans is quite common, and if you are thinking about taking this approach, you can use a personal loan calculator to compute the amount you would pay each month and your total interest paid over the life of the loan. For example, if you took out a $20,000 personal loan to settle your credit card debt and repaid that loan over 36 months at a rate of 8.00%, you would make a monthly payment of $627 and have a total interest payment of $2,562.

It can be more difficult to estimate the cost of paying off debt with a credit card, as rates change periodically. But if you are being offered a 0% APR balance transfer card, then you would need to look at any fees associated with the balance transfer (5% would not be unusual). If you transferred $20,000 onto a 0% APR card and paid a 5% fee, you would pay $1,000. At first, it might seem that the balance transfer option is more affordable. But this is only the case if you can pay off the entire balance before the 0% APR ends, because when it ends, you could face an interest rate of 18.00% or higher.

Pros and Cons of Personal Loans

Both balance transfer credit cards and personal loans can be good options depending on the amount and type of debt you have. If you need more than 12- to 18 months to pay off your debt, personal loans generally offer lower APRs. Personal loan terms vary, but it’s possible to borrow up to $100,000 and pay off the balance over several years.

However, your interest rate will also depend on your credit score — a low score can mean a high interest rate. It’s smart to compare a few personal loan rates to find the best offers.

Pros and Cons of Personal Loans for Debt Consolidation
Pros	Cons
Those with good credit can secure lower APRs.	The interest rate may be high if you have bad credit.
Loans can be large enough to consolidate many types of debt.	It could be a few years before your debt is fully paid off.
Budgeting is easier with fixed interest rates and monthly payments.	There’s less flexibility in your monthly payments, as they’re fixed.
You can choose from different repayment terms.	An origination fee may apply, which could be up to 8% of the loan amount.

Pros and Cons of Balance Transfer Credit Cards

If you have debt on only a few credit cards, a balance transfer credit card might allow you to save on interest while you pay it down. These cards can offer lower or even 0% APRs for a certain period of time, usually for 12 to 18 months. This gives you time to pay off the total balance transferred from other cards.

However, suppose you do not pay off the balance within that window. In that case, the interest rate could rise above the rate you were initially paying before you consolidated the amounts to your balance transfer credit card.

Pros and Cons of a Balance Transfer Credit Card for Debt Consolidation
Pros	Cons
You can get a low or 0% APR for an initial period, thus saving on interest.	You need a good to excellent credit score to qualify.
Once your debt is paid off, you have an additional open credit line, which may boost your credit score.	You may not be able to transfer the full amount of your debt to the card.
Some balance transfer credit cards offer rewards, points, or other perks.	There may be a balance transfer fee, which generally is 3%-5% of the balance transferred.
You’ll have the flexibility to pay off as much as you’d like each month with no fixed payment schedule.	If you don’t pay off your debt during the promo period, the interest rate may become higher than that of your initial debt.

Using A Balance Transfer Credit Card and a Personal Loan

It’s not always necessary to decide between a personal loan vs. balance transfer credit card. A third option for debt consolidation is to use both a personal loan and a balance transfer credit card. You could use a balance transfer credit card to pay off as much high-interest credit card debt as you can at a low APR. Then, you’d take out a personal loan to pay off the rest of your debt at a lower interest rate than what you’re currently paying.

To figure out how much of a personal loan to take out in this scenario, add up your total debt. Next, calculate how much you would have to pay each month in order to pay off your debt in full by the end of the promotional APR.

For example, if you had $4,000 in credit card debt and a 0% APR that lasted for 18 months, you’d have to pay about $222 each month. If you weren’t able to pay that much, you could consider applying for a personal loan to pay off the remaining amount.

The Takeaway

Three ways to proactively consolidate and pay off debt are to use a balance transfer credit card, a personal loan, or a combination of the two. In general, a balance transfer credit card is best for those with good credit and primarily credit card debt. Those with various types of debts and who need a structured debt payment plan may prefer a personal loan. A combination of both can suit a variety of situations.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

What is a balance transfer loan?

A balance transfer is a credit card transaction whereby debt is moved from one account to another. These cards often offer a 0% introductory APR for 12 to 18 months, which means any balances moved to the card could potentially be paid off interest-free. The downsides are that there is often a balance transfer fee, and there may be a limit to the total amount you can transfer to the new card. Explore a balance transfer credit card vs. personal loan to determine which is the most affordable way to manage your debt.

Does a balance transfer hurt your credit?

It depends. Opening a new credit card and transferring all your other credit card balances to it could push your credit utilization ratio to its limit, which would hurt your credit score. Your score is also negatively affected from the hard inquiry that results from applying for a new card. However, if you use a balance transfer credit card wisely and pay off all of your higher-interest cards, that will lower your credit utilization ratio and build your score.

Is there a difference between a loan and a balance transfer?

Either a balance transfer or personal loan can be a way to consolidate debt, but they are not the same thing. A debt consolidation loan is where you take out a loan to pay off your existing debt, while a balance transfer allows you to move your existing debt onto one credit card. Each option has unique pros and cons and exploring a personal loan vs balance transfer is a key step in managing debt.

What credit score do you need for a balance transfer or personal loan?

A good to excellent credit score of 670 or higher is generally required for a balance transfer credit card that offers an attractive low interest rate. It may be possible to obtain a personal loan with a credit score of 580 or better.

How long does a balance transfer take to complete?

It’s not unusual for a balance transfer to a new credit account to take two to three weeks to be completed, though some transfers are accomplished in just a few days. How long a balance transfer takes will depend on several factors, including how many different banks or credit card companies you are transferring from and whether or not you are setting up a new credit account or using an existing one. During the transfer process, it’s important to keep tabs on your old and new accounts and to continue making any payments that are due.

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