Debt consolidation loan vs balance transfer card: which is cheaper?

How each one works

A debt consolidation loan gives you a lump sum, usually at a fixed rate, that you use to pay off other debts. You then repay the loan in fixed monthly payments over a set term.

A balance transfer card moves your existing card balances onto a new card, often with a low or 0% introductory rate for a limited time. After that period the rate usually jumps.

Side by side

• Fees. Loans may have an origination fee. Balance transfers often charge a transfer fee, commonly a few percent of the amount moved. Check both.
• Rate. A promotional card rate can be very low for a short time. A loan's rate is fixed for the whole term.
• Deadline. The card's introductory period ends. The loan has a fixed payoff date.
• Credit needed. The best card offers usually need good credit. Loans are available across a wider range of scores, at different prices.
• Amount. Card limits can cap how much you can move. Loans can be larger.

When a balance transfer card tends to win

When you can clear the whole balance before the introductory rate ends, and your credit is strong enough to qualify. Divide the balance by the number of promotional months to see whether the monthly payment is realistic.

When a consolidation loan tends to win

When the balance is large, you need more time than a promotional period gives, or you want one predictable payment and a definite end date. A loan also avoids the risk of running the new card up again.

How to decide with numbers

1. Add up your total balance and what you pay in interest now.
2. For the card, add the transfer fee and estimate interest if anything is left after the intro period.
3. For the loan, use the all-in APR, fee included, and the total you will repay.
4. Choose the lower total you can truly afford each month.