However, they also come with some potential serious hooks. First, the interest rates marketed are almost always short-term, often from six months to two years, and there are often one-time balance transfer fees that can exceed 3%. So, that 0% interest may only last for six months before it shoots back up to a double-digit rate, and you'll still pay that one-time fee, generally just added to your balance.
Also, the promotional interest rate rarely applies to new balances. So, if you're planning to use this new card for new purchases, those balances and the interest rate are calculated separately and will cost you more money.
Debt consolidation loan
Debt consolidation loans can be especially useful when combining multiple high-interest debts into a single loan and payment. These loans are often structured as a term loan, with a schedule to pay it off over a fixed number of payments. Having a single payment and a fixed term can make it easier to pay off high-interest debts in a more timely manner.
However, just like with credit card balance transfers, they may also have teaser rates, meaning your payment could increase when that promotional rate expires. Additionally, lenders that focus on a lower monthly payment may be offering a longer-term loan. While you may pay less per month, you may end up paying more in total dollars. There can also be fees you owe that are not factored into the monthly payment and interest rate you are quoted.
Home equity loan
For borrowers with large high-interest debts, this may be the best way to reduce the cost of paying off those debts. Since they are secured by your home, HELOCs often offer very attractive -- and fixed -- interest rates that will be the lowest-cost way to consolidate and pay off debt. The terms are typically more clear, and the costs are generally required to be very clearly disclosed to borrowers.
However, there are also reasons why using home equity may not be the best way to consolidate debts. Closing costs can be significant, so on smaller debts the math may be less favorable. And since you're borrowing against your home, failing to pay could put your home at risk of foreclosure.
