Overview

A personal loan balance transfer means taking a new personal installment loan and using those funds to pay off other balances. Unlike a credit card balance transfer (often tied to 0% APR promos), personal loan transfers turn revolving debt into a fixed‑term loan. That can help borrowers who want predictable monthly payments and a clear payoff date.

How it works — step by step

  • Apply for a personal loan that allows you to use the proceeds to pay existing debts (many unsecured personal loans do).
  • Use the loan funds to pay off higher‑rate debts (credit cards, other personal loans).
  • Make one monthly payment to the new lender on the fixed schedule until the loan is paid off.

When it typically helps

  • Your new APR is meaningfully lower than the weighted average APR of your current debts.
  • You want a fixed repayment schedule and predictable payoff date.
  • You don’t plan to add more balance to paid‑off cards (which can undo savings).

Costs and pitfalls to watch

  • Origination or transfer fees: Personal loans may charge an origination fee (commonly 1–6%); add that to your cost comparison.
  • Loan term length: A lower monthly payment can still mean more total interest if the term is much longer.
  • Credit effects: A hard credit inquiry and a new account can lower your score temporarily; paying off cards may improve credit utilization (a plus).
  • Prepayment penalties: Rare on many personal loans but confirm before you sign.

Key comparison: Personal loan vs. credit card balance transfer

  • Credit card balance transfers often offer short 0% APR promotions but may charge transfer fees and revert to high rates after the promo ends.
  • Personal loans offer a fixed APR and set payoff date, so there’s less risk of a sudden rate jump.

See our comparison guide for a deeper look: How Debt Consolidation Personal Loans Compare to Balance Transfers.

How to decide (quick checklist)

  1. Calculate the total cost: new loan interest + fees vs. current interest you’ll avoid. Use a loan calculator.
  2. Confirm the new APR and fees in writing.
  3. Check eligibility: lender requirements typically include credit score, income, and debt‑to‑income ratio.
  4. Avoid re‑using paid‑off credit lines for new purchases.

Tool: Run the numbers

A simple test: compare total payments over the payoff period (not just APR). If your current debts would cost $10,000 in interest over remaining repayment and the new loan (including fees) costs $6,000, the transfer likely makes sense. For a guided method, see: Debt Consolidation Personal Loans: How to Calculate the Real Savings.

Professional perspective

In my practice, borrowers who prepare—shop rates, include fees in the math, and lock in a reasonable term—usually get the most value from a personal loan balance transfer. When clients simply chase lower monthly payments without checking total cost, they sometimes pay more over time.

Authoritative guidance

Consumer protection agencies emphasize comparing total costs and reading loan disclosures before consolidating debt (Consumer Financial Protection Bureau). The Federal Reserve notes that installment loans change repayment dynamics compared with revolving credit (Federal Reserve).

Bottom line

A personal loan balance transfer can be a real option to save interest and simplify repayment — but it’s not automatically the best choice. Evaluate the new APR, fees, term length, and your discipline around not adding new credit card debt. Run the numbers and, if needed, consult a certified financial planner for personal advice.

Disclaimer

This article is educational and does not constitute personalized financial advice. Your situation may differ; consult a qualified advisor before making major debt decisions.

Sources

  • Consumer Financial Protection Bureau (consumerfinance.gov)
  • Federal Reserve (federalreserve.gov)