Personal loans and balance transfer cards are the two main routes, and which one costs less depends on your credit score and how fast you can pay
A personal loan from a bank, credit union, or online lender lets you borrow a fixed amount, pay it back over a set schedule (usually two to seven years), and close out your credit cards. A balance transfer card moves your existing balances to a new credit card, usually with zero interest for a promotional period (typically six to 21 months). The best choice depends on three things: your credit score, how much you owe, and whether you can pay it off before the promotional period ends.
Personal loans work best if you have fair credit (scores in the 580–669 range) or if you owe more than $10,000. Balance transfer cards work best if you have good credit (670+), owe less than $10,000, and can pay the full balance within the promotional window. If you fall between these profiles, run the actual numbers — the difference in total cost can be hundreds of dollars.
Key Takeaways
- Personal loans charge a fixed interest rate and monthly payment, so your cost is locked in from day one and you know exactly when you will be debt-free.
- Balance transfer cards charge zero interest for a set period, then a regular rate afterward, so the math only works if you pay off the full balance before the promotional period ends.
- Personal loans are available to people with credit scores as low as 580, while balance transfer cards typically require a score of 670 or higher.
- Personal loans charge an origination fee (usually 1–10% of the loan amount), while balance transfer cards charge a one-time transfer fee (typically 3–5% of the amount moved).
- If you cannot pay off a balance transfer card before the promotional rate expires, the regular interest rate (often 18–25%) makes the card more expensive than a personal loan would have been.
Personal loans: fixed cost and predictable payoff
A personal loan gives you a lump sum, which you use to pay off your credit cards in full. You then repay the lender in equal monthly installments over a fixed term. The interest rate is locked in, so your total cost is set the moment you sign the paperwork.
The upfront cost is an origination fee, charged by most lenders and ranging from 1% to 10% of the loan amount. A $10,000 loan with a 5% origination fee costs you $500 upfront (either deducted from the loan or added to what you owe). After that, you pay only interest and principal each month — no surprises.
Personal loans work through banks, credit unions, and online lenders. Credit unions often charge lower rates and fees than banks, especially if you are a member. Online lenders like LendingClub, Prosper, and Upstart approve people with lower credit scores than traditional banks do. Banks like Chase and Wells Fargo require higher scores but may offer lower rates if you already bank there.
The tradeoff: personal loans charge interest for the entire repayment period. A $10,000 personal loan at 12% interest over five years costs roughly $2,700 in interest alone. But you know that number before you borrow, and you cannot accidentally end up paying more by missing a important date.
Balance transfer cards: zero interest, but only if you finish in time
A balance transfer card moves your existing credit card balances to a new card with zero interest for a promotional period. During that window — typically six to 21 months — you pay no interest, only principal. Every dollar you pay goes directly to reducing what you owe.
The upfront cost is a balance transfer fee, usually 3% to 5% of the amount you move. Moving $5,000 to a new card with a 4% fee costs $200 upfront. If you pay off the entire $5,200 within the promotional period, your total cost is just that $200 fee. If you do not, the regular interest rate (often 18–25%) kicks in on any remaining balance.
Balance transfer cards require good credit — typically a score of 670 or higher — because the card issuer is betting you will pay off the balance before the rate resets. Cards that offer longer promotional periods (18–21 months) usually require higher scores and may have higher annual fees.
The math only works if you can pay off the full balance before the promotional period ends. If you owe $8,000 and have a 12-month zero-interest window, you need to pay roughly $667 per month. If you can do that, your cost is just the transfer fee. If you cannot, and $2,000 remains when month 13 arrives, that $2,000 will accrue interest at 20%+ per year — making the card far more expensive than a personal loan would have been.
Comparing costs: personal loan vs. balance transfer
| Scenario | Personal Loan (12% over 5 years) | Balance Transfer Card (4% fee, 12-month 0% promo) |
|---|---|---|
| $5,000 debt, paid off in 12 months | ~$1,300 total interest | $200 fee (if paid in full by month 12) |
| $5,000 debt, paid off in 24 months | ~$1,300 total interest | $200 fee + ~$1,800 interest on remaining balance (if 20% rate applies after month 12) |
| $10,000 debt, fair credit (18% rate) | ~$4,900 total interest over 5 years | $400 fee + likely cannot transfer (score too low) |
The table shows why balance transfer cards only work if you can pay aggressively. In the first scenario, the card saves $1,100. In the second, it costs $1,800 more because the promotional period ended before the debt did. In the third, the personal loan is the only realistic option because the credit score required for a balance transfer card is not there.
To find the actual cost of a personal loan you are offered, use an online calculator with the specific rate and term the lender quotes you. Do the same for a balance transfer card by calculating what the remaining balance would be at the end of the promotional period, then adding the interest that would accrue at the regular rate. The numbers tell you which route saves money in your situation.
Credit score requirements and interest rates
Your credit score determines whether you can borrow at all, and at what rate. Personal loans are available to people with scores as low as 580, though the interest rate will be higher (often 24–36%). Scores of 620–669 typically may have access to for rates of 15–24%. Scores of 670+ usually may have access to for rates of 8–18%.
Balance transfer cards require scores of 670 or higher, and the best promotional periods (18–21 months at 0%) go to people with scores of 740+. If your score is below 670, a personal loan is your only option.
If your score is between 620 and 669, compare the personal loan rate you are offered against the balance transfer card rate that would explore after the promotional period ends. If a personal loan is offered at 18% and a balance transfer card's regular rate is 22%, the personal loan is cheaper even if you cannot pay off the balance transfer in time.
Before you borrow, check your credit score through a free service like AnnualCreditReport.com or through your bank or credit card issuer. Knowing your actual score helps you predict what rate you will be offered and whether a balance transfer card is even an option for you.
Debt consolidation loans from credit unions
Credit unions often offer debt consolidation loans specifically designed to pay off credit cards. These are personal loans, but credit unions typically charge lower rates and fees than banks or online lenders, especially for members who have been with the union for a while or who have direct deposit set up.
To join a credit union, you must meet membership criteria — often based on where you work, where you live, or membership in a specific organization. Once you join, you can borrow. Rates vary by union and by your credit profile, but credit union rates are often 2–4 percentage points lower than bank rates for the same credit score.
If you are not yet a member of a credit union, check whether you are may be able to access. Many people may have access to through their employer, their school, their union, or their county of residence. The process takes 10–15 minutes online. If you are may be able to access and have time before you need the money, joining a credit union and waiting a few months can lower your borrowing cost significantly.
Some credit unions also offer a credit builder loan, which is a smaller loan designed to improve your credit score while you borrow. If your score is very low (below 580), a credit builder loan followed by a consolidation loan may be a better path than trying to borrow the full amount at once.
When to use a home equity loan or HELOC
If you own a home and have built equity (the difference between what your home is worth and what you owe on the mortgage), a home equity loan or HELOC (home equity line of credit) can consolidate credit card debt at a lower rate than a personal loan.
Home equity loans are fixed-rate loans secured by your home. HELOCs are lines of credit you draw from as needed, with variable rates. Both typically charge 2–6 percentage points less than personal loans because the lender can foreclose on your home if you do not pay.
The risk is real: if you cannot repay, you lose your home. Use this route only if you are confident in your ability to pay and if the rate savings are substantial enough to justify the risk. For most people with credit card debt, a personal loan or balance transfer card is safer because they do not put your housing at stake.
If you do have home equity and are considering this route, get rate quotes from at least two lenders and compare the total cost (interest plus fees) against a personal loan quote for the same amount and term. The lower rate only matters if the total cost is genuinely lower.
Frequently Asked Questions
Can I use a personal loan to pay off credit cards and then run up the cards again?
Legally, yes — the loan money is yours to use as you choose. Financially, it is a trap. If you borrow $10,000 to pay off credit cards and then charge $10,000 back onto those cards, you now owe $20,000 instead of $10,000. Before taking out a consolidation loan, commit to not using the paid-off cards, or close them once they are paid off.
What if I cannot pay off a balance transfer card before the promotional period ends?
The regular interest rate (usually 18–25%) applies to any remaining balance. You can then transfer that balance to another zero-interest card if your credit score still qualifies, but each transfer charges a 3–5% fee. This strategy works only if you are paying down the balance each month and only transferring what remains.
Do I need to close my credit cards after paying them off with a personal loan?
Closing them will hurt your credit score slightly because it reduces your available credit and shortens your credit history. Keeping them open and unused is better for your score. However, if you have a history of overspending on credit cards, closing them may be worth the small score hit.
How long does it take to get approved for a personal loan?
Online lenders typically approve and fund within one to three business days. Banks and credit unions usually take three to seven business days. Some online lenders offer same-day funding, but approval still requires a hard credit inquiry and verification of income.
Will consolidating credit card debt hurt my credit score?
Yes, temporarily. A hard inquiry and a new account will lower your score by 5–10 points. However, paying off credit cards (which lowers your credit utilization) and making on-time payments on the new loan will raise your score over the following months. Most people see a net improvement within six months.