By the CalcLedger editorial team · Updated September 2026 · Examples use illustrative rates · How we calculate
If you're carrying credit card debt at 20% or more, the two most common ways to cut the interest are a 0% balance transfer credit card and a personal loan. Both can save a lot of money. Which one is better depends on how much you owe, how fast you can pay it off, and how disciplined you are with credit cards.
How a balance transfer works
You open a new credit card that offers 0% APR on transferred balances for a promotional period, often 12 to 21 months. The new card pays off your old cards, and you owe the new card instead. You usually pay a balance transfer fee of 3% to 5% of the amount moved. When the promotional period ends, any remaining balance starts charging the card's regular APR, which is typically 20% or higher.
How a personal loan works
A personal loan gives you a lump sum to pay off the cards, which you repay in fixed monthly payments over a set term, typically 2 to 7 years. The rate is fixed and depends heavily on your credit. Some lenders charge an origination fee. Our debt consolidation guide walks through personal loans in more detail.
The numbers: $8,000 at 23% APR
Suppose you owe $8,000 on cards averaging 23% APR and you've been paying $300 a month.
| Option | Monthly payment | Time to pay off | Total interest + fees |
|---|---|---|---|
| Keep the cards, $300/mo | $300 | 38 months | ≈ $3,309 |
| Balance transfer, 18 months at 0%, 4% fee, paid off in the promo | $462 | 18 months | $320 |
| Personal loan, 13% APR, 3 years, no fee | $270 | 36 months | ≈ $1,704 |
If you can pay about $462 a month, the balance transfer is the clear winner: $320 in total costs instead of more than $3,300. The personal loan saves about $1,600 compared with doing nothing, with a lower payment than you have now.
Total cost to pay off $8,000 at 23% APR
Interest plus fees
The balance transfer trap
Now suppose you take the balance transfer but keep paying just $300 a month. After 18 months you've paid $5,400, and $2,920 is still left when the 0% rate ends. That balance now accrues interest at the card's regular rate, often 24% or more. It's still cheaper than keeping the old cards, but the savings shrink, and the risk grows if you also start using the card for new purchases.
Before choosing a balance transfer, divide the balance plus the fee by the number of promotional months. If you can't reliably pay that amount every month, a personal loan's fixed schedule may serve you better.
When a balance transfer is the better choice
- You have good to excellent credit. The best 0% offers usually require a score around 690 or higher.
- The debt is small enough to pay off within the promo period.
- The new card's credit limit is high enough to cover your balance. You won't know the limit until you're approved, and it may be lower than you hoped.
- You'll stop using the card for new purchases. On many cards, new purchases don't get the 0% rate.
When a personal loan is the better choice
- The balance is too large to pay off in 12 to 21 months.
- You want a fixed payment and a guaranteed payoff date.
- Your credit is fair, so you won't qualify for a good 0% offer, but can still get a personal loan well below your card rates.
- You'd find it tempting to use the new card. A loan doesn't come with a new credit line to spend.
Combining both
Some borrowers use both: a balance transfer for the part of the debt they can pay off during the promotion, and a personal loan for the rest. It adds complexity, but for larger balances it can cut total interest further. Whatever you choose, pay on time. A single late payment can cancel some 0% promotions and adds late fees.
Effects on your credit score
Both options require a hard credit check, which usually lowers your score a little for a short time. A personal loan often improves your score afterward, because it pays your cards down to zero and card utilization is a major scoring factor. A balance transfer moves the debt to a new card, so your overall utilization changes less. But the new card adds to your total available credit. Either way, keep your old cards open if they have no annual fee, since closing them can raise your utilization.
Read the fine print
- Transfer fee: a few cards offer no-fee transfers, but 3% to 5% is typical.
- Deadline: many offers only apply to balances transferred within the first 60 to 120 days.
- Same-bank rule: you usually can't transfer a balance between two cards from the same bank.
- Origination fee: compare personal loans by APR, not just the interest rate.
Run your own numbers
Enter your balance, current rate, and payment in the debt payoff calculator to see your current payoff date. Then try the balance transfer by entering 0% and the payment needed to clear it in time. Compare that with a personal loan in the loan calculator. For a plan that doesn't use any new credit, see debt avalanche vs. snowball.