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If you’re trying to climb out of debt, transferring what you owe to a low-interest credit card or balance transfer card can be a good solution.
The good news is that many different types of debts can be transferred to your credit card. A personal loan balance transfer can be done, along with auto loans, student loans and even other credit cards.
The tricky part is that which types of debts can be transferred vary by issuer. For a personal loan balance transfer, for example, you can use Citi, Bank of America, Barclays, Capital One or Discover but not Chase or American Express.
Here’s the debt transfer policies you need to know from eight of the largest credit card issuers.
Deciding whether to do a credit card balance transfer or get a personal loan to consolidate debt can be confusing. Both options allow you to simplify finances by consolidating multiple debts into one single payment. However, there are some key differences between balance transfers and personal loans that you need to consider before choosing the best debt consolidation method for your situation.
In this article we’ll compare balance transfers and personal loans to help you determine which is the better option for consolidating your credit card debt.
An Overview of Balance Transfers and Personal Loans
A credit card balance transfer allows you to transfer debt from existing credit cards over to a new card that offers low introductory interest rates. You can transfer balances from one or multiple cards onto the new card and consolidate the payments.
Balance transfer cards typically charge a one-time balance transfer fee between 3-5% of the amount transferred. However, they offer 0% intro APR on transfers for 6-21 months. If you can pay off your debt before the intro period ends, you can avoid interest charges completely.
Personal loans provide an upfront lump sum of cash that you can use to pay off credit card balances. The loan amount, interest rate, and repayment terms are fixed over a set period, usually 2-7 years.
Personal loans have higher interest rates than balance transfers, ranging from 5.99-35.99% APR typically. However, they allow you to pay off debt over an extended time frame in fixed monthly installments.
Below is a quick comparison of some key features:
| Feature | Balance Transfers | Personal Loans |
|---|---|---|
| Interest Rate | 0% intro APR for 6-21 months, then 13-25% variable APR | 5.99-35.99% fixed APR |
| Fees | 3-5% balance transfer fee | 1-8% origination fee |
| Repayment Term | Pay off during intro period | 2-7 years |
7 Key Factors to Consider
As you can see, balance transfers and personal loans have some major differences. Here are 7 important factors to weigh when deciding which option may work better for you:
1. Types of Debt
Balance transfers only allow you to consolidate credit card balances from other issuers. You cannot use them for non-credit card debts.
Personal loans offer more flexibility. You can use the loan funds to pay off credit cards, medical bills, utilities, personal debts, and more. The loan cash is dispensed into your bank account to use as you wish.
If you only have credit card debt, a balance transfer card may be the simpler option. But personal loans allow you to consolidate different debt types together.
2. Amount of Debt
The amount of debt you need to consolidate will influence the better option.
Balance transfer cards often have limits between $1,000 – $15,000. So if you need to consolidate a higher amount, a personal loan may be better.
Personal loans can range from $1,000 up to $100,000 from some lenders. They can accommodate higher debt amounts than most balance transfer credit limits allow.
3. Interest Costs
Balance transfers offer 0% APR intro periods that allow you to avoid interest if you pay off the transferred amount before the promo period ends. This makes them the cheaper option if you can pay off the balance in full quickly.
However, if you need a longer repayment term, the higher interest rates on personal loans may end up costing less overall than a credit card’s post-intro variable APR. Crunch the numbers in a loan calculator to compare total interest costs.
4. Fees
Watch out for balance transfer fees, which range from 3-5% of the transferred amount. Some cards offer fee-free intro periods.
Personal loans charge 1-8% origination fees. But they have fewer additional fees like annual, balance transfer, or late payment fees.
5. Credit Impacts
Both options require a hard credit check that can temporarily knock a few points off your credit scores. However, responsibly managing a new account demonstrates creditworthiness.
A personal loan adds installment loan history, which diversifies your credit mix. Balance transfers increase total credit limits. Both can improve your credit utilization ratio.
As long as you make on-time payments, either option may benefit your credit long-term. Be cautious of applying for too much new credit.
6. Repayment Plan
Balance transfers have flexible minimum payments. If you want fixed payments over a set repayment term, personal loans are likely the better option.
Their structured installment plans make it easier to budget monthly expenses. Calculate the fixed monthly payment on the loan amount and term length you need to see if it fits your budget.
7. Other Options
Beyond balance transfers and personal loans, also consider alternatives like credit counseling, debt management plans, credit card hardship programs, loan refinancing, or debt consolidation with home equity.
Determine if any of these options may provide better terms or financial benefits than what you can get currently from a balance transfer or personal loan.
Deciding Which Option is Best For You
Choosing between a 0% balance transfer credit card and a personal loan for consolidating debt depends largely on your specific financial situation.
Ask yourself these questions:
- How much total debt do I need to consolidate?
- What types of debt do I have (credit cards, medical, etc.)?
- What is my current credit score and likelihood of approval for each?
- How long do I need to pay off my debt?
- What is the total interest cost of each option based on repayment term?
- What fees come with each option?
- Which provides the monthly payment amount I can afford?
- What other debt consolidation options are available to me?
Carefully consider your answers and financial circumstances. Weigh the pros and cons of each method. This can help determine if a balance transfer or personal loan better meets your needs.
Whichever option you choose, be sure you can manage the new payments responsibly. Use the debt consolidation strategically to streamline expenses and pay off what you owe as efficiently as possible.
The Bottom Line
Credit card balance transfers and personal loans allow you to consolidate multiple debts into one payment at a lower interest rate for easier management. Balance transfers offer 0% intro APR periods but have limited transfer amounts. Personal loans provide fixed monthly installment plans over longer repayment terms and accommodate higher loan amounts.
Consider your specific debt situation and financial capabilities to decide if a balance transfer or personal loan makes the most sense for you. Evaluating the key factors outlined above can help you determine the better debt consolidation method to save money and eliminate debt faster.
Rules for debt transfers by issuer
Can you balance transfer a loan? No. Balances from loans, like auto, student or home loans are not accepted. Transfer restrictions: Balance transfers are available for new accounts on select consumer card products within the first 60 days of opening. Only balance transfers from cards that were not issued by American Express are eligible. Customers balance transfer requests may be declined if any of their American Express accounts are not in good standing.
Can you balance transfer a loan? Yes. Customers can transfer balances from any credit cards, personal loans, student loans, auto loans or home equity loans from lenders other than Bank of America®, as well as gas cards, retail and department store cards. Transfer restrictions: Affiliate credit cards issued by Bank of America® are not eligible for balance transfer.
Can you balance transfer a loan? Yes. Eligible card members can transfer any loan, including credit card, personal, home equity, student and auto. Transfer restrictions: Eligible card members can transfer any credit card debt from cards in the Visa, Mastercard, American Express and Discover networks. Customers cannot transfer balances on cards issued by Barclays to another Barclays account.
Can you balance transfer a loan? Yes. Customers can transfer balances from other credit cards, personal loans, student loans and auto loans. Transfer restrictions: Customers cant transfer a balance from another account issued or acquired by Capital One or any of its affiliates or subsidiaries. The total amount of the balance transfer, including any applicable fees, cannot exceed the amount for which cardholders are eligible.
Can you balance transfer a loan? No. Customers can transfer only credit card balances. Transfer restrictions: Customers cant transfer balances from any other account or loan issued by Chase Bank USA, N.A. or its affiliates. Customers cant transfer more than $15,000, including fees and interest, within any 30-day period.
Can you balance transfer a loan? Yes. Customers can transfer credit card debt, personal loans, student loans, auto loans and home equity loans. Transfer restrictions: Customers cant transfer balances from other accounts issued by Citibank, N.A., or its affiliates. Additionally, customers cant transfer to the IRS. Balance transfer payments will process after the account is open for at least 14 days.
Can you balance transfer a loan? Yes. Cardholders can transfer debts including credit and store cards, student loans, medical bills, gas cards, and auto loans. Transfer restrictions: Customers cant use balance transfers to pay any Discover accounts. Customers can transfer any amount, up to their credit available for transfers, which may be less than their total credit line.
Can you balance transfer a loan? Yes. Customers can request balance transfers from various creditors and loan types. Terms and conditions apply. Transfer restrictions: Balance transfers are not available between accounts issued by Wells Fargo or any of its affiliates. Requests are only processed to validated creditors in the U.S. that can receive funds electronically.
Credit card issuers won’t allow debt transfer among their own products
One thing is universal among credit card issuers: You can’t transfer within their own families. And the “family” can extend to a long reach of affiliates.
You cant transfer a balance from one Citi card to another, for example, or from a Wells Fargo personal loan to a Wells Fargo credit card. Additionally, many banks issue credit cards on behalf of other brands, such as airlines, hotels and stores, and the same restrictions apply to accounts with issuers affiliates. For example, Chase is the issuing bank for the United℠ Explorer Card. If you had a balance on that card, you couldnt transfer it to a different Chase card.
Before choosing a card for balance transfers, make sure you know the affiliate relationships involved. For example, Citi, through its Department Store National Bank subsidiary, issues cards for scores of retailers. If you want to transfer a balance from, say, a high-interest Best Buy® card, you shouldnt bother looking at a Citibank credit card.
In most cases you won’t earn rewards on the balances that you transfer, either.
Should I Transfer My Credit Card Balance To A 0% Interest Account?
FAQ
Can I use a credit card balance transfer for a personal loan?
Can you convert credit card to personal loan?
Can I convert my credit card outstanding to personal loan?
Should I convert my credit card balance to a loan?
What is the difference between a personal loan and a balance transfer?
Balance transfer cards let you move your credit card debt to a new card, and they often feature a 0% introductory APR offer for six to 21 months. Personal loans are fixed-term loans with set interest rates, and they can be used to pay different kinds of debts, not just credit cards.
What is a balance transfer card & a personal loan?
Personal loans are fixed-term loans with set interest rates, and they can be used to pay different kinds of debts, not just credit cards. The choice between balance transfer cards and personal loans depends on your debt type and amount, repayment time and credit score.
Should I use a balance transfer credit card or a personal loan?
The choice between balance transfer cards and personal loans depends on your debt type and amount, repayment time and credit score. A balance transfer credit card allows you to move your high-interest balance onto a new card that typically offers an introductory period of 0% interest.
How much does a balance transfer loan cost?
This is an upfront fee that ranges from 1% to 10% of the loan amount. Keep in mind that even with these fees, a balance transfer card or debt consolidation loan may have a lower APR than your current debts, so you can still save money. Best for paying off credit card debt only.