Should You Get a Personal Loan or Use a Balance Transfer Credit Card in 2024?

If you have credit card debt that you'd like to pay off, two financial tools you can use to help knock out your debt as quickly and efficiently as possible are balance transfers and personal loans. While these are both preferable to paying a 20% or higher APR (like most credit cards have), the best choice for you depends on your unique situation.

Here's a quick guide to both options and what you should keep in mind before you decide.

Reasons to use a balance transfer credit card

Getting a 0% intro APR on balance transfers might seem to make this option your best one, especially considering that it's tough to find a personal loan with an interest rate below 10% these days. So, we'll start there.

While the average credit card interest rate has increased considerably over the past couple of years, it might surprise you to learn that 0% intro APR balance transfers are still fairly easy to find. In fact, some of our favorite balance transfer credit cards have 0% intro APRs for as long as 21 months. And in many cases, the 0% intro APR offer applies to new purchases as well as balance transfers.

In a nutshell, a 0% intro APR balance transfer ensures that every dime you pay toward your debt is applied to the principal. If you transfer a $10,000 balance and make a $500 payment when your first statement is due, you'll owe $9,500 -- not a penny will go anywhere else.

One big caveat, which we'll also discuss in the next section, is that balance transfers aren't free. You'll typically pay 3% to 5% of the amount transferred as a balance transfer fee, so if you transfer $10,000, you could end up with a starting balance as high as $10,500 on your new card. To be sure, this is far better than paying a 25% APR, which is roughly the current credit card average, but it's worth keeping in mind.

Reasons to use a personal loan instead

While balance transfer credit cards can be excellent financial tools, there are a few reasons why a personal loan could be a better option:

• Longer time to pay: A balance transfer is only a smart idea if you know you'll be able to pay off the balance before the introductory period runs out. If not, you'll start paying interest, and many credit cards have 25% or higher APRs. Meanwhile, personal loans can have terms of as long as 72 months (six years) or even longer in some cases. By stretching your repayment term, your monthly payments can be more affordable.
• Higher limits: If you have $5,000 or $10,000 in credit card debt, a balance transfer card might be able to accommodate you. If you have $30,000 or $50,000 in debt, that could be an issue. Fortunately, some of the top personal loan companies originate loans of as much as $100,000.
• No fees: To be sure, some personal loans have origination fees, but many of them don't. As mentioned, balance transfers typically come with fees of 3% to 5%, so a personal loan can help you avoid this.

Which is best for you?

Like most personal finance decisions, there's not a one-size-fits-all answer. It depends on a few factors, such as the size of your debt, how quickly you'll realistically be able to pay it off, and more. However, the key takeaway is not only that these options exist, but there are plenty of different choices within each category, so shop around and see which is right for you.