Debt can get heavy. Thankfully, you might have options to lighten your load.

Two such options are a balance transfer and a personal loan. Which is better for you?

It depends on how much debt you’re carrying.

On your road to repayment, think of a balance transfer as a cart for your debt: convenient and light, but if you go too far with too much, the wheels may break.

In contrast, a bill consolidation personal loan is more like a truck: potentially less maneuverable, but steady.

There’s a little more to it than that, however. So here are the details about balance transfers and debt consolidation loans to help you decide which is best for you:

What Are Balance Transfers and Why Do People Like Them?

When debts get you down, a balance transfer can be a good option if you’ve got good credit, can pay back the balance in the short term (such as less than a year), and don’t have a lot to repay.

A balance transfer simply moves your debt to another account; a popular choice is a low-APR credit card. Interest-wise, the card will usually have what’s called an introductory rate, sometimes as low as 0% APR.

Also, there’s often a fee of 3-5% of the total balance transferred.

For the right kind of debt holders, this is a good deal. The low APR can save loads of cash, even with the transfer fee. Plus, balance transfer cards consolidate debt into one account, so you don’t have to keep track of multiple monthly bills.

The Downsides to Balance Transfer Credit Cards

Now, here’s where the wheels can fall off of balance transfer cards: the 0% APR only applies to the introductory period, which is often six months to one year.

If you don’t make your payments during this period, then the interest rate can spike, and you could get caught paying more than what you would with a normal card.

There are a few more drawbacks, as well. As with most credit cards, you must have good enough credit to qualify for them. And they can be disastrous if you misuse them; you usually don’t want to use a balance transfer on day-to-day purchases, however tempting it may be. 

What’s the Difference Between a Balance Transfer and Bill Consolidation Loan?

An alternative to a balance transfer credit card is a bill consolidation loan, also called a debt consolidation loan. Similar to a balance transfer, you can use this type of personal loan to pay off other debt balances, such as higher-APR credit cards.

Debt consolidation loans can be sensible for mid and long-term debt since the interest usually stays the same and you don’t have to worry about lapsing introductory periods. Unlike a credit card, you’ll generally know how much you’ll be paying and for how long.  Also, making all your payments on a personal loan will ensure the debt is paid off at the end of the loan term!

Also, many people find them to be useful since it’s harder to pile on more debt; you can’t “swipe” a personal loan.  

Pop Quiz: Here’s When a Balance Transfer is Better Than a Personal Loan

If you answer “yes” to the following questions, then you should consider a balance transfer:

  • Is your debt small relative to your annual income?
  • Can it be paid off in less than one year?
  • Can you qualify for a credit card?
  • Are you ok with another credit check that might harm your credit?
  • Can you easily control your credit card spending and not increase your debt?

But if you’ve answered “no” to one of these questions, you might want to review some alternatives, such as a bill consolidation loan.

For the Long Haul or the Short Term, Debt Relief is Always a Journey

Sometimes, getting out of debt just takes time.  But often, you’ll have options to help you along the path.

If you make the right choice, you may be on the path to a better financial future much more quickly. 

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