Balance Transfer Credit Card vs. Debt Consolidation Loan: Which Is Better?

Debt consolidation loans and balance transfers can help you manage your debt and lead to lower interest charges.

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Whether you should get a debt consolidation loan or a balance transfer depends on the amount of debt you wish to repay and how long it will take to pay it off. While balance transfers are more suited when paying off small balances, debt consolidation loans tend to work better when combining debts of larger sums.

A balance transfer credit card lets you benefit through a 0% APR offer that stays in place for 12 to 21 months. At the end of this period, any outstanding amount starts accruing interest. A debt consolidation loan, on the other hand, typically comes with lower interest rates than credit cards, but the interest starts accruing immediately. You need to make fixed monthly payments for a predetermined time period that usually ranges from one to six years.


The debt consolidation loan vs. balance transfer comparison does not produce a clear winner because the one that might work better for you depends on your specific situation.

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MoneyGeek’s Takeaways

Balance transfer credit cards come with 0% APR offers that stay in place for 12 to 21 months.

Debt consolidation loans usually have lower APRs than the regular APRs of balance transfer cards.

Balance transfers work well for smaller amounts, whereas debt consolidation loans are better suited for larger amounts.

Is a Balance Transfer the Same as Debt Consolidation?

Even though both might be of help in repaying existing debt, a balance transfer is not the same as debt consolidation. With a balance transfer, you move existing debt from one or more credit cards to a different card with a lower APR. Typically, this involves using a new card with a time-based 0% APR offer on balance transfers.

As long as you pay off your transferred balance within the promotional period, you do not incur any interest charges. However, any remaining balance at the end of the promo period starts accruing interest at the card’s regular balance transfer APR. Some balance transfer credit cards offer balance transfer checks that you can use to repay other forms of debt. The amount you may transfer to a credit card is typically any amount less than the available credit limit, but this can depend on the bank.

The debt consolidation vs. balance transfer comparison tilts in favor of the former when it comes to how much debt you may combine. This is because debt consolidation loans tend to come with higher approval limits than balance transfer credit cards. Besides, you may use a debt consolidation loan to combine different types of debts such as credit cards, personal loans, auto loans and student loans.

A debt consolidation loan requires that you make fixed monthly payments for the life of the loan. These loans tend to be unsecured, meaning that they are not backed by any collateral (your car, your home, etc.). People with poor credit histories may want to consider applying for a secured debt consolidation loan instead because secured loans have a higher chance of approval. Whether you obtain a secured or unsecured loan, you can typically choose a term of one to six years, depending on your financial situation. These loans come with fixed APRs that are often lower than credit card APRs.


Balance Transfers and Debt Consolidation at a Glance

  • Balance Transfer Credit Card
    Debt Consolidation Loan
  • How to Request

    Online, over the phone, in person

    Online, over the phone, in person

  • When to Use

    To repay high-interest credit card debt

    To repay large amounts of debt from
    different sources

  • Repayment Terms

    Need to make at least minimum monthly
    payments; regular APR applies at the
    end of the promo period

    Fixed payments through the course of
    the loan term; APR remains the same

  • Credit/Loan Amount Limits

    Typically any amount less than a card's
    available credit limit

    Secured: Up to $500,000
    Unsecured: Up to $100,000

  • APR Ranges

    0% APR offer usually applies for 12 to 21
    months; then, the card's regular APR
    takes effect

    3.22% to 35.99%

  • Other Fees

    Balance transfer fee: 3% to 5% of the
    amount you transfer

    Loan origination fee: Up to 6% of the borrowed amount
    Prepayment penalty: Up to 5% of the borrowed amount

Pros and Cons of Balance Transfer vs. Debt Consolidation

While a debt consolidation loan or a balance transfer might help you deal with existing debt, one may work better for you than the other, depending on your circumstances. This is because both come with their share of pros and cons.

Pros and Cons of a Balance Transfer

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  • Based on the duration of the 0% APR offer, you pay no interest for 12 to 21 months.
  • Getting a new card might help improve your credit utilization ratio, and thereby, your credit score.
  • Balance transfer cards may come with other benefits, such as no annual fees, no foreign transaction fees and spend-based rewards.
minusSign icon
  • The APR that applies after the promo period might be high.
  • You typically need good to excellent creditworthiness to qualify.
  • Balance transfer fees with 0% APR offers range from 3% to 5%.
  • Canceling your old card can hurt your credit utilization ratio and credit score.
  • You can't be sure of the credit limit you qualify for until your card’s approval.
Pros and Cons of a Debt Consolidation Loan

plusSign icon
  • It can help consolidate large debts.
  • A single monthly payment can help simplify managing your debt.
  • You might qualify for a low APR if you have good to excellent credit.
  • You might be able to repay your debt sooner.
  • It can bring down your credit utilization ratio and improve your credit score.
minusSign icon
  • No 0% APR offers.
  • Interest begins accumulating immediately.
  • Loan origination fees can be as high as 6% of the borrowed amount.
  • A prepayment penalty might apply.
  • An average credit score might bring with it a high interest rate.

Should You Get a Debt Consolidation Loan or a Balance

If your existing debt comes with medium to high interest rates, getting a debt consolidation loan or a balance transfer credit card can result in reduced interest charges, a lower overall monthly payment and fewer bills to track. However, determining which might work better involves paying attention to different aspects.

  • What is your existing debt? A balance transfer card might work well for you if the total amount you wish to transfer from existing cards falls within the new card’s credit limit. If you don’t get approved for a high enough credit limit to transfer all your high-interest debt, you’ll end up with a balance remaining on your old card and a new maxed-out card. In such a scenario, a debt consolidation loan might be the better alternative.
  • How much time do you need? Getting a balance transfer credit card might be worth it if you think you might be able to repay the entire debt you wish to transfer during its 0% APR offer period. If you need more time to repay your debt, a debt consolidation loan might work better for you. While 0% APR balance transfer offers usually last for up to 21 months, debt consolidation loans can come with loan terms of up to six years.
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Some consumers transfer balances repeatedly to take advantage of multiple 0% intro APR offers, rather than a debt consolidation loan, as they pay down their debt. While this strategy can work for some, it is risky because there's no guarantee that you'll be approved for the next 0% intro APR offer. If you fail to qualify, you'll be stuck with a balance on another high-interest rate card. — Lee Huffman, credit card expert at

Balance Transfers and Debt Consolidation Loans Alternatives

If you fail to qualify for a debt consolidation loan or a balance transfer credit card, you may still work on clearing your debt in other ways. The severity of your debt and your ability to make repayments will affect which method might work well for you.

  • bank icon

    Contacting creditors

    If you’re having trouble keeping up with your monthly payments, consider contacting your creditors directly. Depending on your situation, you might qualify for hardship programs or get to make lower payments.

  • smallCalculator icon


    People tend to get into debt because of careless spending habits. If you find yourself in this boat, the first step you need to take is to create and stick to a weekly/monthly budget that helps you spend less.

  • financialPlanning icon

    Debt management plan

    Credit counselors help people who have trouble managing unsecured debt by getting them on debt management plans. Debt management plans usually give you up to five years to clear your debt. Unlike debt consolidation loans, a debt management plan does not involve taking on more credit. It usually requires that you send a single payment to your credit counseling agency, which, in turn, disburses it to your creditors.

  • laptop icon

    Start a side hustle

    Earning additional money outside of your day job can help you pay down your debts. There are many ways to make extra money, like driving for Uber, delivering for DoorDash, selling crafts on Etsy, tutoring students and more. Focus on the skills you have and market them to people who need your help.

  • balanceTransfer icon

    Debt settlement

    If you’ve missed making a few payments toward your credit cards, their issuers might be open to accepting less than what you actually owe through debt settlement. However, taking this path will likely hurt your credit score, and mention of it stays on your credit report for seven years. Additionally, the amount forgiven by the creditor may be considered taxable income that you need to report on your taxes.

  • house2 icon

    Home equity

    Some homeowners might think about borrowing against the equity of their homes. However, not making timely payments can result in you losing your home. If you are certain you’ll be able to keep up with the repayments, your options for digging into your home’s equity include home equity lines of credit (HELOC), home equity loans and cash-out refinancing.

  • badCredit icon


    You may consider taking this step only if none of the other avenues work and after seeking professional assistance. While bankruptcy might help wipe out your existing unsecured debt, know that it has a significant adverse effect on your creditworthiness and your ability to get credit in the near future.

Other Questions You May Have About Balance Transfer Cards

Getting to know the answers to other commonly asked questions about the balance transfer vs. debt consolidation comparison will better position you to make an informed decision when deciding which might be a better option for you.

Next Steps

Now that you know where the debt consolidation loan vs. balance transfer credit card comparison stands, determine which of the two might work better for you. If you decide to get a balance transfer card, compare your options against parameters such as length of the 0% APR period, regular APRs, balance transfer fees and annual fees.

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About Rajiv Baniwal

Rajiv Baniwal headshot

Rajiv Baniwal is a journalist who has been covering financial topics for over 15 years. Meticulous in his research, he provides accurate and up-to-date information. His expertise includes mortgages, loans, credit cards, insurance and international money transfers.

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