Which is better – A 0% Balance Transfer or a Personal Loan?

If you have an existing credit card debt that you will not be able to clear for a few years, you should be looking into ways to save on interest charges. So what are your options? You could look at a good balance transfer offer or a personal loan.

At first glance, many of the balance transfer offers sound too good to resist. There are the enticing offers of 0% balance transfers and even low rate balance transfers for the life of the balance. There is a downside though.

With a credit card you only need to pay the minimum balance every month. By doing this there is no way you will clear your existing debt any time soon. You many also use the credit card for new purchases. Keep in mind that the interest rate for any new purchases is likely to be a variable rate and usually much higher. Also, any money you pay off your card will be paid off your existing balance transfer debt first, whilst your new purchases will be accumulating and attracting a higher rate of interest.

In my opinion, a balance transfer credit card should be used only to clear debt and not be used for making new purchases. You should also plan to pay off more than the minimum monthly payment. If you have the discipline to stick to this, then a balance transfer offer will probably be your best choice.

If you need to reduce any further temptation of getting into debt with a new credit card, then the best option for you would be a personal loan. A personal loan offers you a fixed rate of interest over a period of time and is probably the more sensible and less expensive option to clearing your existing debt.

For more information on balance transfers and reducing credit card debt check out our earlier articles:

Balance Transfers – know what you’re getting into!

Managing Credit Card Debt