What Is a Balance Transfer?

A balance transfer involves moving balances from one or more credit cards to another card. Some card issuers also allow you to transfer a balance from an outstanding loan to your balance transfer credit card or from your card to a bank account. Additionally, you might be able to use a balance transfer check to pay off other debts or deposit funds into your bank account.

A balance transfer can help you save money if you receive a low promotional annual percentage rate (APR) on your balance transfer card. For example, some cards might offer an intro 0% APR on transferred balances for up to 21 months. If you pay off the card before the promotional rate ends, you won’t pay any interest on the transferred balances.

Pros and Cons of Balance Transfers

Pros

• Save money with an intro 0% APR offer.
• Get more time to pay off balances.
• Consolidate multiple debts onto one card.
• The intro 0% APR may apply to purchases.

Cons

• You’ll often pay balance transfer fees.
• Balance transfer cards might have high standard APRs.
• You won’t know the credit limit you’ll be offered.
• Each application might hurt your credit.
• Credit card companies may have restrictions.

What Is a Debt Consolidation Loan?

A debt consolidation loan is a loan you use to pay off other debts. Consolidating debts can save you money if your new loan has a lower interest rate than your other debts. You’ll also have fewer payments to manage, and your monthly payment might be lower than the previous combined monthly payments.

Unsecured personal loans are a popular option for debt consolidation loans. Some personal loan lenders even advertise their personal loans as debt consolidation loans and create website pages to highlight this use of the loan.

Pros and Cons of Debt Consolidation Loans

Pros

• Low APRs may be available.
• Get prequalified without hurting your credit.
• Lock in fixed rates and terms.
• It might improve your credit scores.

Cons

• You might have to pay an origination fee.
• It could lead to more debt.
• You might not receive a low rate or high loan amount.

Which Is Better: A Balance Transfer Card or Debt Consolidation Loan?

Both balance transfer cards and debt consolidation loans can help you consolidate debt and accrue less interest. However, you can compare offers and consider your finances when trying to determine which will be best.

When to Choose a Balance Transfer Card

• You have fair to excellent credit.
• You think you’ll get approved for a card with a credit limit that can cover most of your outstanding balances.
• You can stick with a plan to pay off the card before the introductory rate ends.

When to Choose a Debt Consolidation Loan

• You don’t think you could get a balance transfer card with an intro 0% APR offer and a high enough balance transfer limit.
• You tend to overspend when you have available credit on your credit cards.
• You prequalify for a loan with a low or no origination fee and a lower rate than your current balances.
• You want a specific monthly payment amount and payoff date.

Get Expert Mortgage Services with O1ne Mortgage

At O1ne Mortgage, we understand that managing debt can be challenging. Whether you’re considering a balance transfer card or a debt consolidation loan, our team of experts is here to help you make the best decision for your financial future. Call us today at 213-732-3074 for personalized mortgage services and advice.