Should You Use a Personal Loan or Balance Transfer to Pay off Credit Card Debt?

The NFCC often receives questions from readers about their money challenges. We answer common questions in our Ask an Expert series to help readers find the information they need.

Question: I have a large balance on my credit card and I’m looking for a way to pay it off. Would you recommend seeking a personal loan or a  balance-transfer credit card?

Answer: Dear Reader,

When credit card debt is overwhelming, it’s common for people to seek solutions like personal loans and balance transfers. If you’re feeling weighed down by your debt, or if you’re struggling to maintain payments, it’s natural to consider these solutions.

Both of the options you mentioned can be helpful. However, they will not inherently reduce your debt, since they involve moving your balances from one account to another. So before you proceed with a personal loan or a balance transfer, I recommend exploring other types of debt management options that could be more beneficial overall. 

Is it bad to move debt from one account to another? 

Moving debt from one account to another can be part of a good debt management strategy. However, there are downsides to going this route. Here are some pros and cons of using a balance-transfer credit card or a personal loan to handle debt:

Pros

• Potential for lower interest rates
• Potential for lower monthly payments
• Consolidate multiple debts into one

Cons

• Good credit is required to qualify for new loans and credit cards
• You may not be approved for enough credit or loan funds to pay off your old debt
• Potential for new fees such as a balance transfer fee (usually 3% or 5%) or a loan origination fee

In particular, you’ll want to be cautious with balance-transfer credit cards. While the initial 0% APR offer can be enticing, these offers only last a limited amount of time. Once the offer expires, the rate can typically skyrocket to as high as 29.99%. Additionally, the CFPB reports that these types of cards often have complicated terms and conditions that make them risky for users. 

When it comes to personal loans, it’s important to note that having a low payment is not the same thing as saving money. Yes, you can reduce your monthly payments by accepting a longer repayment term for your loan, but this will mean paying more in interest charges over time. 

With that said, a loan is often a good choice because of how low personal loan rates are in comparison to credit cards. In late 2025, the average interest rate on credit cards was 20.97% while the average personal loan rate was 11.65%.

Can your credit-card issuers help with your debt?

Another way to deal with your debt is to go directly to your credit card companies for help. As counter-intuitive as it sounds, there are things creditors can do to make your debt repayment a bit easier. 

For example, some creditors may agree to lower your interest rate. If you have a long history of on-time payments and you’ve never gone over your credit limit, they are more likely to work with you. 

To get the most out of this strategy, stop using your credit card for new charges. Then, focus on paying extra each month to get out of debt sooner. The more you can pay, the better. Although it can be challenging, you may want to rework your budget on your own or with the help of an NFCC-certified credit counselor. In addition to evaluating your current financial situation, a counselor can also help you find the best repayment strategy for you.

Another possibility is to consider enrolling in a credit card hardship program. Some creditors who offer these programs can suspend interest rates for a period of time and even reduce your payments. 

However, you’ll have to meet the creditor’s qualification criteria and may have to provide evidence of a financial hardship. Your credit card account also can be closed, and your hardship program may show up on your credit reports, which could negatively impact your credit scores. 

But, if your debt is about to spiral out of control and you’re likely to miss payments, your credit score could take a harder hit if you miss payments altogether. Though your credit rating might take a dip when you start a hardship program, it can improve over time with on-time payments.

Consider a Debt Management Plan (DMP)

Since your main concern is credit card debt, a Debt Management Plan (DMP) could potentially be your best option. These plans, which are available through NFCC-certified credit counseling agencies, allow you to consolidate multiple debt payments into one, and they can potentially reduce your interest rates and monthly payments. 

When you set up a meeting with an NFCC-certified credit counselor, they can help you determine if this is the best solution and walk you through the ins and outs. They can also discuss all of your debt management options with you, and suggest which one could be the best fit for your needs.

Sincerely,
Bruce McClary 

Bruce McClary is Senior Vice President of Memberships & Communications at the National Foundation for Credit Counseling.