Balance Transfer vs Personal Loan: Which Saves More Money?
A balance transfer card usually wins when you can pay off the debt inside the promotional period. A personal loan usually wins for bigger balances or longer payoff times. Run both with the balance transfer calculator and the debt consolidation calculator.
Key takeaways
- Balance transfers suit debts you can clear in under about two years.
- Personal loans give a fixed rate and a set payoff date.
- In the $8,000 example, the 0% card saved about $2,043 versus staying put.
- Always check what the rate becomes after the promotion.
Side by side
| Balance transfer card | Personal loan | |
|---|---|---|
| Interest | 0% promo (often 12 to 21 months), then a high rate | Fixed rate for the whole term |
| Upfront cost | Transfer fee, commonly 3% to 5% | Origination fee on some loans |
| Payoff time | Whatever you choose, but the promo ends | Set term, often 2 to 7 years |
| Risk | Rate jumps if balance remains or you pay late | Fewer surprises; a fixed payment |
| Credit needed | Good to excellent | Fair to excellent |
A worked example
On an $8,000 balance at 24% APR with $400 a month, a 0% card for 18 months with a 3% fee ($240) saves about $2,043 versus staying put and clears the debt in 1 year 9 months. About $1,040 would remain when the promo ends unless you pay roughly $458 a month.
How to decide
- Divide the balance by the promo months. If that payment fits your budget, a transfer is hard to beat.
- If it does not, compare a personal loan’s fixed payment.
- Add the fee to the cost of each option before comparing.
Frequently asked questions
Q. Is a balance transfer cheaper than a personal loan?
If you clear the balance within the 0% period, yes, usually. If you cannot, the post-promo rate can make a fixed-rate personal loan cheaper.
Q. What is a typical balance transfer fee?
Most cards charge 3% to 5% of the amount moved.
Q. What if I cannot pay it off before the promo ends?
The remaining balance starts accruing interest at the card’s regular rate, so compare that scenario before you decide.
