Should I Use a Personal Loan or Credit Card to Pay Off Debt?

The best option depends on your rates, fees and repayment goals.

Either option may be useful in the right situation, but a personal loan and a credit card work differently. A personal loan generally provides a fixed amount with a set repayment schedule, while a credit card or balance-transfer offer provides revolving credit with terms that can change based on the account.

Before consolidating debt, compare the APR, fees, repayment period, monthly payment and total amount you expect to repay. A new loan or card does not eliminate debt, so the plan works best when it is paired with a realistic budget and a strategy to avoid adding new balances.

How Does a Personal Loan Work for Debt Consolidation?

A debt-consolidation personal loan can combine multiple balances into one installment loan and one regular payment. Depending on your qualifications and the offer, the new loan may have a lower interest rate than some of the debts being consolidated.

How Does a Credit Card Balance Transfer Work?

Some credit cards offer a low or 0% promotional rate on transferred balances for a limited period. A balance-transfer fee may apply, and the APR* can increase after the promotional period ends. Review what rate applies, how long the promotional period lasts and how new purchases are treated before transferring debt.

What Should I Compare Before Consolidating Debt?

• APR* and whether it is fixed, variable or promotional
• Origination or balance-transfer fees
• Monthly payment
• Repayment timeline
• Total estimated interest and fees
• Whether the new payment fits your budget
• What happens when a promotional period ends

When Might a Personal Loan Make Sense?

A personal loan may be worth considering when you prefer a defined payoff schedule and the new loan offers terms that improve your overall repayment plan. Compare the full cost, not just whether one monthly payment is easier to manage.

When Might a Balance-Transfer Credit Card Make Sense?

A balance-transfer card may be worth considering when the promotional terms provide enough time to make meaningful progress on the balance and the transfer fee does not outweigh the potential interest savings. A plan to pay down the transferred balance before the promotional period ends is important.

Will Debt Consolidation Fix My Debt?

Not by itself. Consolidation changes how debt is structured, but it does not address the spending or financial circumstances that created the balances. Building a budget and limiting new debt are important parts of any payoff plan.