What's the Best Way to Tackle Debt? Comparing Balance Transfer Cards vs. Loans

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Are balance transfer cards or personal loans the best way to tackle your debt? We'll explain the pros and cons of each option to help you decide.

If you have a significant amount of debt, it can make everyday life stressful. It may feel like you're never able to get on top of your finances. This is especially true if you don't know how to pay off debt.

The good news is that there may be options available to help you get out from under your debt. The challenge is finding the solution that best fits your needs. Keep reading to learn about two options available to help you pay off your debt faster: Balance transfer credit cards and loans.

Using a balance transfer credit card to pay off debt

A balance transfer credit card is a type of card marketed toward people who want to transfer their existing credit card debt to a new card. These cards usually have much lower interest rates than standard credit cards. In fact, many of the top balance transfer cards have no interest at all for a certain length of time. These types of cards can make it easier for people to pay off their debts in a more affordable way.

When looking for a new balance transfer card, be sure to look for one with a 0% APR rate. This promotional offer is typically only available to new cardmembers, and the promotional rate will be valid for a limited time only.

Here are the pros and cons of using balance transfers to pay off your debt.


  • You can get a much lower interest rate.
  • You can consolidate your credit card debt and credit card payments.
  • It can result in less interest paid over time.
  • It can make it easier to pay off debt faster.


  • Promotional interest rates are only valid for a limited time -- typically 12 to 18 months.
  • After the promotional rate is up, your APR may be higher than that of your previous card.
  • If you're not careful with your spending, you could continue to build debt with your new card.
  • You'll pay balance transfer fees for every card balance that you transfer -- typically 3% to 5%.
  • You'll need to have good credit to be approved for a balance transfer card.
  • You will likely pay expensive fees if you don't pay off the transferred balance within the promotional timeline.

Using a personal loan to pay off debt

Another financial tool that you can use to pay off your debts is a loan. This option is useful for when you need cash to pay off a lump sum of debt. When you take out a personal loan, you'll repay the debt in fixed monthly installments. You can use the cash from your loan to pay off your high-interest debts and then make payments on the loan until it is paid off.

Similar to balance transfer cards, there are pros and cons to using personal loans to pay off your debt.


  • You may be able to get a lower interest rate.
  • You can consolidate debt so you have fewer payments to make.
  • Your monthly loan payment may be lower than what you were paying on all of your other debts.
  • Personal loan repayment terms typically range from 12 to 60 months, giving you more time to pay off your debt.


  • You may not be able to get a lower interest rate.
  • You may need to pay costly loan origination fees -- typically 1% to 8%.
  • Your credit score will dictate the type of loan you can get, and a lower score may result in a less desirable loan with a higher interest rate.
  • You may be tempted to keep using your credit cards, which can result in more debt.
  • A longer loan term means more interest costs.

So, which option provides the best way to tackle debt?

You'll have to think carefully when deciding whether a balance transfer credit card or a personal loan is the best way to tackle your debt issue. The answer won't be the same for everyone.

A personal loan may be a good option if you're able to get a loan with a low-interest rate. You should figure out the total cost of the loan before agreeing to go this route.

To help you determine what is a good interest rate for a personal loan, calculate the total interest costs over the life of the loan and check the loan origination fee to figure out how much you'll be paying for your new loan. This may be a good option for more significant amounts of debts that you might not be able to pay off in a few months or a year.

On the other hand, a balance transfer credit card may work better for your needs. Always check to see what the balance transfer fees are for a particular card before going this route. You should also check on the promotional interest rate timeline and get a card that offers 0% interest. You'll need to make sure that you can pay off the total transferred balance before the promotional period runs out, or you'll be charged additional fees. For more information, be sure to check out our guide to learn more about how credit card interest works.

Here's how to decide what will be best for your debt repayment needs:

  • Calculate the total amount of debt that you owe.
  • Figure out which budgeting method will work best for helping you stay on top of your finances.
  • Figure out how much you can pay each month toward your debt.
  • Outline a timeline for how quickly you can pay off the debt.
  • Compare the interest rates and all fees for balance transfer cards and personal loans.

Considering the above can help you determine the best strategy for your needs. Make sure that you create a debt payoff plan and stick to it to avoid racking up more debt and avoid unwanted extra fees.

Debt can be overwhelming, but with patience, hard work, and a solid plan, you can pay off your loans and high-interest credit cards and get ahead again.

If you struggle with money matters, check out our personal finance resources to learn other money management tips.

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