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Balance Transfer vs Personal Loan

Which debt restructuring option is cheaper?

About this calculator

A balance transfer card and a personal loan are the two common ways to move high-interest credit card debt somewhere cheaper. A balance transfer card charges a one-time fee, typically 3% to 5% of the balance, and then a promotional rate, often 0%, for a set number of months; whatever is left when the promo ends is charged the card's regular rate. A personal loan charges a fixed rate for a fixed term, with an equal payment every month, and often an origination fee. This calculator follows both month by month and shows which costs less in interest and fees, how long each takes to pay off, and whether the promo ends before the card is cleared.

How to use this calculator

Enter the Balance to Pay Off and the Monthly Payment You Can Afford. For the balance transfer card, enter the Transfer Fee, the Promo Length in months and the APR After Promo; the promo rate itself is under Advanced assumptions and defaults to 0%. For the personal loan, enter its APR, the Loan Term in months and the Origination Fee. Results update as you type, and the inputs are saved in the page address so you can share or bookmark a scenario.

The method

The transfer fee is added to the card balance on day one. Each month the card is charged the promo rate divided by 12 during the promo and the APR after the promo divided by 12 afterward, and then your monthly payment is applied, until the balance reaches zero. If, after the promo, your payment does not cover the month's interest, the card is never paid off and the calculator says so. For the personal loan, the origination fee is deducted from the money the lender sends, which is how most lenders charge it, so the loan is sized up until what you receive equals your balance: the amount borrowed is the balance divided by one minus the fee rate. The loan then has a standard fixed payment over its term. Each option's cost is its interest plus its fee, and the headline is the difference.

Worked example using the default values

A $10,000 balance and $400 a month. The balance transfer card adds a 3% fee of $300, so it starts at $10,300. Eighteen months at 0% and $400 a month bring it down to $3,100, which then accrues 24% APR; it is paid off in month 27 (2 years 3 months) after $303 of interest, for a total cost of $603 including the fee. The personal loan at 12% for 36 months with a 5% fee must borrow $10,526 so that $10,000 reaches your card, a fee of $526. Its payment is $350 a month and its total cost, interest plus fee, is $2,586. The balance transfer is cheaper by $1,984.

Interpreting the results

The balance transfer usually wins when you can clear most of the balance during the promo, because the only certain cost is the fee. The flag under the headline tells you how much is left when the promo ends; that remainder is where the card's cost grows. In the example, $3,100 is left and costs $303 of interest, which is still far less than the loan. The loan wins when the promo is short, the regular card rate is high and your payment is small. At $180 a month, the card takes 96 months and the loan comes out $4,602 cheaper, even though its $350 payment is higher, which the calculator also points out. Compare payoff times too: the card's payoff depends on your discipline, while the loan's is fixed by its term.

Practical tips

Divide the transferred balance, including the fee, by the promo months to find the payment that clears it in time: $10,300 over 18 months is $572.22, so round up to $573 a month. Balance transfer cards usually require good credit, may set a credit limit lower than the balance you want to move, and usually require the transfer within a set window after opening the account. Late payments can end the promo rate early. New purchases on the card may be charged the regular rate, so keep spending on a different card. With a personal loan, check whether the quoted APR already includes the origination fee, and look for loans with no fee.

Limitations

Interest is charged monthly at the APR divided by 12, while cards usually compute interest daily, so real card interest can be slightly higher. The calculator assumes no new charges, on-time payments, fixed rates and no prepayment penalty on the loan, and it assumes the whole balance fits within the card's credit limit. Your monthly payment goes to the card; the loan uses its own fixed payment, which may be higher or lower than what you entered. Taxes and credit score effects are not included.

Frequently Asked Questions

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