Overview

When you owe high‑interest credit card debt, two common ways to save on interest are a debt‑consolidation personal loan or a credit card balance transfer. Each tool can reduce interest costs, but which one saves more depends on three things: the all‑in interest rate, up‑front fees, and how quickly you can pay the balance down. In my practice helping over 500 clients, the best choice usually comes down to math plus the borrower’s repayment discipline.

How each option works

  • Personal loan: You borrow a lump sum with a fixed APR and fixed term (often 1–7 years). You make predictable monthly payments until the loan is repaid. Origination or application fees sometimes apply. Because interest is fixed and the term is known, personal loans offer budgeting certainty.

  • Balance transfer: You open a credit card that offers a promotional APR (commonly 0%–1.99% for a limited period, often 6–21 months). You pay a transfer fee (typically 3%–5% of the amount moved). After the promo ends, the rate jumps to the card’s standard APR. The savings rely on paying the balance before the promotional term ends (Consumer Financial Protection Bureau).

Key cost factors to compare

  • APR vs promotional rate: Compare the effective APR on a personal loan to the promotional APR on the balance transfer. A 0% promo looks attractive, but factor in the transfer fee.

  • Transfer and origination fees: Balance transfer fees typically run 3%–5%; personal loans can charge origination fees (1%–6%) or none. Add these fees to total interest cost when comparing options (Consumer Financial Protection Bureau).

  • Repayment timeline: If you can pay the transferred balance within the promo period, a balance transfer often costs less. If not, a personal loan’s fixed APR and term can be cheaper and protect you from a rate spike.

  • Credit score and approval: Better credit increases the chance of getting lower rates for either option. A balance transfer card often requires good‑to‑excellent credit for the best offers.

Simple cost comparison (two examples)

Example A — Balance transfer paid within promo

  • Debt: $10,000
  • Balance transfer promo: 0% for 12 months, 3% transfer fee = $300
  • If paid in full in 12 months: total cost = $300 (no interest)

Example B — Personal loan

  • Debt: $10,000
  • Personal loan APR: 8% fixed for 3 years (36 months), no origination fee
  • Monthly payment ≈ $313; total repaid ≈ $11,268; total cost ≈ $1,268 in interest

Bottom line for the examples: If you can pay $10,000 in 12 months, the balance transfer saves roughly $968 compared with the personal loan. If you cannot finish payment in the promo window, the personal loan may be cheaper over time.

Practical decision steps (a quick checklist)

  1. Calculate total cost for each option: include fees and projected interest for the period you expect to repay. Use an online amortization calculator or spreadsheet.
  2. Compare monthly payments: choose the plan you can reliably afford without adding new high‑interest balances.
  3. Confirm the promo details: know the promo length, transfer fee, and the post‑promo APR.
  4. Check prepayment penalties: most personal loans allow early payoff, but confirm.
  5. Avoid re‑using paid‑off credit lines: closing accounts or increasing utilization can affect your credit score.

When a balance transfer is usually better

  • You have a clear plan and cash flow to pay the balance within the promo period.
  • The promotional APR is long enough to finish repayment and the transfer fee is low enough that total cost beats a loan’s interest.

When a personal loan is usually better

  • You need predictable payments and a fixed schedule to avoid falling into a cycle of high interest.
  • Your timeline to repay is longer than common balance transfer promos or you expect to miss the promo end date.
  • You prefer to consolidate multiple accounts with one monthly payment and a set payoff date.

Common mistakes I see

  • Ignoring transfer fees and origination fees when comparing options.
  • Overestimating ability to pay off the balance during the promo period.
  • Using the freed credit line to rack up new debt, which defeats the purpose of consolidation.

Helpful links and resources

My recommendation

Run the numbers with realistic timelines. If you can confidently repay within a 0% promo, a balance transfer often saves more in interest despite the transfer fee. If you need a longer repayment horizon or want predictable budgeting, a personal loan usually wins. In client work, borrowers who combine a personal loan with a disciplined repayment plan more reliably finish debt and improve credit utilization.

Professional disclaimer

This article is educational and does not replace personalized financial advice. For decisions based on your full financial picture, consult a licensed financial professional.

Sources

  • Consumer Financial Protection Bureau, “Balance Transfers and Credit Card Fees” (consumerfinance.gov)
  • Personal practice experience working with over 500 clients on debt consolidation (professional observation)