Personal Loan vs. Balance Transfer: Which Works Best for You?

Stuck choosing between paying your bills or paying off debt? It’s a tough spot to be in, but you’re not alone. Sometimes, a little extra help can make all the difference. A personal loan and a credit card with a balance transfer offer are two tools that can help you simplify your finances by consolidating your debt into one monthly payment.

Let’s look at the differences between these two options to help you make the best decision for your situation.

How does a personal loan work?

A personal loan is considered an installment loan, or a set amount of money that you can borrow and then pay back with interest, or the cost of borrowing, usually through fixed monthly payments and a set payoff date.

Your monthly payment includes a portion of both the principal (or the original amount borrowed) and interest. Most personal loan repayment terms range from 2 to 5 years. Typically, personal loans have predictable monthly payments and a fixed interest rate, meaning your interest rate remains the same, even if the market changes.

Many people use a personal loan to consolidate debt, which involves combining multiple debts into a single monthly payment, often at a lower interest rate. OneMain offers personal loans for debt consolidation ranging from $1,500 to $35,000.

When you apply for a personal loan, lenders consider several factors like your credit score, income, debt-to-income ratio (DTI) and whether you’re applying for a secured or unsecured loan.¹ A secured loan is a loan that’s backed by something of value, like a car, called collateral. Because providing collateral reduces the lender’s risk, a secured loan could boost your borrowing power, potentially allowing you to qualify for a higher loan amount or a lower interest rate. If you fail to repay the loan, the lender could take your collateral to recover their losses. An unsecured loan doesn’t require collateral.

Once you’re approved and have signed the loan documents, you typically receive your funds quickly — sometimes even the same day.

If you’d like to get an idea of what terms you might qualify for before you apply, you can check for prequalified offers online. Prequalification is typically quick and doesn’t affect your credit, but keep in mind that it’s not a final loan offer. When you officially apply for a loan, the lender will run a hard credit check, which causes a small, temporary dip to your credit score.

How does a credit card balance transfer work?

A credit card balance transfer is the process of transferring credit card debt from one or more credit cards to a different card, usually to take advantage of a promotional low or 0% annual percentage rate (APR). APR is the yearly cost of borrowing. You often need good or excellent credit to qualify for a balance transfer offer.²

A balance transfer offer typically lasts anywhere between 12 to 21 months.³ Depending on the offer, you could save money on interest charges if you’re able to pay off the full transferred balance before the offer period ends. Once the offer period ends, a higher interest rate will apply to the remaining balance.

Although you can typically make new purchases on the credit card you use for a balance transfer, those purchases are usually subject to a higher APR than the balance transfer rate. Always check the details of the credit card agreement before using the card.

What’s the difference between a personal loan and credit card balance transfer?

	Personal Loan	Credit Card Balance Transfer
How it works	You borrow a lump sum of money upfront from a lender, bank or credit union and repay it in fixed monthly installments for a set period.	You move existing debt to a different credit card with a low or 0% promotional APR balance transfer offer. You must make at least a minimum monthly payment.
Fees	Personal loans may have an origination fee (a one-time fee a lender may charge to process an application and set up the loan), which varies by state and lender.	Card issuers may charge a balance transfer fee of 3-5% of the transferred amount.4
Repayment timeline	Typically 2-5 years, although this can vary by lender	Promotional periods on balance transfer offers typically last between 12 and 21 months. Then, any unpaid balances will be subject to the card’s standard APR.
Set payoff date?	Yes	No
Potential savings	You may save money on interest if the loan has a lower interest rate than your current debts. Your monthly payment may also be lower depending on the length of the loan term.	You may save money on interest if you pay off the full transferred balance before the offer period ends.

What should you consider when choosing between a personal loan and a balance transfer for debt consolidation?

Whether you’d be better off with a balance transfer or a personal loan depends on a few factors, including:

How much you need to borrow

Personal loan amounts can vary depending on the lender, your local laws and your creditworthiness. The size of the loan you’d apply for would depend on the amount of debt you want to consolidate.

For a credit card balance transfer, you’ll need to consider your credit limit, which is often based on your creditworthiness. The credit limit you receive may not cover all the balances you need to transfer. Some card issuers may also have a balance transfer limit, which may cap your debt transfer amount at around 75% of the card’s overall credit limit. Plus, issuers may limit the amount that can be transferred within a certain timespan.⁵

If you decide to move forward with a balance transfer, you might consider moving the debt with the highest APR to maximize your interest savings for a low or promotional APR.

Your credit history

When you apply for a personal loan, lenders consider your credit history, but it’s not the only factor. OneMain looks beyond your credit score and takes your full financial picture into account to help you choose the right loan for you.

You might find it challenging to qualify for a credit card with a balance transfer offer if you have less-than-perfect credit. In some cases, you may be able to transfer a balance to an existing credit card, but if you owe a significant amount on all your cards, this may not be an option.

The types of debt you need to repay

Personal loans can be used to consolidate various types of debt, including credit card debt, other personal loans and more. On the other hand, credit card balance transfers are typically used to pay off credit card balances.

Your repayment plan

If you want a predictable payoff timeline for your debt, a personal loan may be a good choice for you. Because a personal loan has a set repayment period, you’ll know exactly when the loan will be paid off.

With a credit card, you don’t have a set payoff date. Before committing to a balance transfer offer, consider whether you can repay your debt before the promotional APR period ends. Also consider how you plan to use and pay off the card. Your payoff timeline can change if you continue making purchases, only pay the minimum or carry a balance after a promotional APR expires.

Take time to review your budget and compare what repayment could look like in both scenarios, including how much you can afford to pay each month and when you’d expect to fully pay off the debt.

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Should you apply for credit card with a balance transfer offer or a personal loan?

Both balance transfers and personal loans may help you consolidate debt and simplify your finances. A credit card with a balance transfer offer could be a good fit if you feel confident that you’ll be able to pay off your balance when the offer period ends. If you owe a large amount of debt, need more time to pay it off or your credit score needs a bit of improvement, a personal loan may better suit your needs.

If you’re ready to move forward with a personal loan to pay off your debt, you can check for prequalified offers from OneMain, and it won’t affect your credit score.

This article has been updated from a previous posting on March 31, 2025. Skyelar Kavanagh contributed.

Sources

1 https://www.consumerfinance.gov/ask-cfpb/what-is-a-personal-installment-loan-en-2114/
2, 3, 4 https://www.bankrate.com/credit-cards/balance-transfer/balance-transfer-guide/
5 https://www.experian.com/blogs/ask-experian/is-there-a-limit-on-balance-transfers/