Balance Transfer Card or Personal Loan: Which Is best for You?

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The Balance Transfer Card or the Personal Loan: What is best for You?
Find two options to consolidate credit: a balance transfer credit card or personal loan.


Updated on January 31st 2023.

A majority of the products featured here are from our partners, who pay us. This influences which products we review and the location and manner in which the product is featured on the page. However, this does not influence our evaluations. Our opinions are entirely our own. Here is a list of and .



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Credit cards for balance transfer and consolidation are two popular strategies that could reduce the amount of interest you pay and assist you in paying off debt more quickly and quickly and easily.
How do you decide between a balance transfer credit card and personal loan? Consider these questions to find out the best way to pay off your debts.
What is the best way to decide between a balance transfer card as well as personal loan

When deciding between the balance transfer credit card or a personal loan for debt consolidation, there are four main questions to consider.
1. What type of debt do you have?
The type of debt you have may assist you in deciding which product is most suitable for your needs.
For instance, it works by letting you move high-interest credit card debt to your new credit card however, you aren't able to transfer other debts.
A has more flexibility. It can be used to pay off multiple types of debts that are not secured, such as credit cards, medical bills, payday loans and existing personal loans.
2. How much debt do you have?
The amount of money you owe -- as well as the time it takes to pay it back -is a different aspect to consider.
Balance transfer cards may have the same credit limit as the typical loan, so it's best for smaller debts. A balance transfer card comes with the benefit of a promotional APR of zero percent for a specific time frame, typically between 15 and 21 months. You'll want to make sure that you pay off the debt within the first period, during which you'll be charged no charges for interest.
>> MORE:
An unsecured debt consolidating loan comes with more time to pay back typically ranging from one to seven years, and many lenders offer high loan amounts, sometimes as high as up to $50,000. Although you may not save as much money on interest, a consolidation loan is typically an ideal choice for those with greater debts who require more time to pay it off.
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Nerdy Tip
If you're unsure of the amount of debt you've got then you can input the current amount of debt, your interest rate, and monthly payments in a to get the full picture.


3. What product are you eligible for?
Debt consolidation and balance transfer loans are different in terms of eligibility criteria however both consider your credit score, which is why you should consider it prior to applying, you must have a good credit score.
Borrowers with good to excellent credit (690 credit score or more) are likely to be eligible for both a balance transfer card and the debt consolidation loan. If you have fair or bad credit (689 credit score or lower), you may only be eligible for the loan. Consolidation loans are offered to borrowers across the credit spectrum.
>> COMPARE:
Depending on the lender, you might be able be pre-qualified for an loan, which means you can review potential loan conditions without harming your credit score.
Want to consolidate your debt? Find out if you qualify for an consolidating debt loan.
Simply answer a few questions and you'll receive personalized results of our loan partners.


The amount of the loan
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4. What are the prices?
Finally, compare the costs of consolidating each product. Though balance transfer cards come with a promotional 0% APR period, some will charge an additional fee for balance transfers, which is typically 3% to 5percent of the total amount transferred.
Debt consolidation loans are priced between 6% and three percent APR contingent on your credit profile as well as the loan amount and repayment period. Certain lenders will also charge an origination fee that will cover the cost of processing your loan. It is an upfront cost which can be as low as 1% to 10% of the loan amount.
Keep in mind that, even with these charges that a balance transfer credit card or debt consolidation loan may offer a lower interest rate than your current debts, so you can still save cash.
Balance transfer is different from. personal loan

Balance transfer card



Personal loan



Type of debt


Ideal for paying off credit card debt only.



Ideal for paying off credit card debts or other types of debts that are not unsecured.



Debt amount


The best option for debts of a smaller size that can be paid off within the promotional timeframe usually between 15 and 21 months.



Best for larger debts that may take one to seven years to pay off.



Criteria for qualification


Loans are available to borrowers with good to good credit (690 credit score or more).



Available to borrowers across the credit spectrum, including those with bad or fair credit (689 score or lower).
Possibility to pre-qualify for certain lenders.



Costs


Includes zero-interest promotional period.
It is possible to charge between 3% and 5% transfer fee for balance.



Fixed monthly interest.
May charge 1% to 10% of the origination fee.









Consolidating your debt successfully

Consolidation is a good option to reduce the burden of your financial burden. But it won't address your spending habits that lead to getting the balance transfer card or credit card for debt consolidation loan.
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Establishing a can aid in keeping your budgeting in line. Your budget should include debt repayments as well as cash for things you'd like to buy.
Even more important is to avoid running up large debts on credit cards you've paid off. A consolidation loan (or balance transfer) card won't be helpful if it ends up breaking your budget and pushing you further into debt.


About the author: Jackie Veling covers personal loans for NerdWallet.







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