Personal loan vs. credit card debt: Which is better?

We've all been there: weighing options, doing the math, and hoping we're making the right decision. Should you get a debt consolidation loan, or should you transfer your balances to a new credit card?

The best way to deal with your debt depends on a lot of factors, so the more you know, the more confident you can be about choosing the best option for you. It's about taking control, making informed choices, and moving forward with confidence. And let's face it: Confidence looks good on everyone.

Let's explore personal loans versus credit cards, and how the different options might align with your life, your goals, and your financial health.

Personal loan vs. credit card: Key differences

You can use personal loans and credit cards in very different ways to deal with existing debt. Here's a basic rundown:

• Personal loans are installment debt with a set payoff schedule and usually a fixed interest rate. You could use a personal loan to consolidate multiple high-interest debts.

• Credit cards are revolving debt with variable interest rates. You could use a balance transfer to move debt from one credit card to another. Some balance transfer cards have temporary promotional 0% APR offers.

If you hope to find debt relief and believe debt consolidation could help, you can explore both personal loans and balance transfer cards to figure out which makes the most sense. Choosing can sometimes feel complicated, but we'll walk you through the options so you get the big-picture view.

Personal loans key features

Personal loans are installment loans you can use for purchases or debt consolidation. You get a lump sum of money up front and pay it back on a set schedule. Rates are typically fixed, so payments don't change and you know the total and monthly costs up front.

Personal loans generally offer lower interest rates than credit cards (unless you have an intro 0% APR offer on the card). This means you could potentially reduce your monthly debt payment by consolidating high-interest credit card debt with a personal loan.

Credit card key features

Credit cards provide access to a line of credit you can draw from as needed up to your credit limit. Payments depend on how much you've charged. Cards have a variable rate, and the minimum payment is usually a percentage of your balance. There's no specific timeline for payback as long as you make your minimum payment each month.

Balance transfer credit cards usually give you a promotional interest rate on balance transfers, often 0% for 12 months or more. A credit score in the good to excellent range (a FICO Score of 670 or higher) could unlock the best 0% APR offers.

Most cards charge a balance transfer fee of 3% to 5% of the transferred balance. You can transfer existing credit card balances up to the amount of your credit line, minus the balance transfer fee. Any balance you don't pay off by the time the 0% rate ends then accrues interest at the standard (usually much higher) credit card interest rate.

Here's a quick comparison chart:

When a personal loan may be better for debt

Choosing a personal loan over credit card debt often makes sense if:

• You need longer to pay off your debt. Personal loans often have multi-year payoff times, such as a five-year repayment term. Most 0% APR balance transfer offers last 12 to 24 months. If you can't pay off your debt within that shorter time, a personal loan could be a better fit.

• You want predictability. You know your interest rate and total borrowing costs up front with a personal loan. You also know exactly when your loan will be paid off, without having to use a debt payoff calculator to find out.

• You don't trust yourself to pay more than the minimum. When you use a balance transfer card to consolidate debt, paying only the minimum payment likely won't get rid of your balance before the intro rate ends. By contrast, personal loan payment amounts ensure your debt is paid in full by the end of the loan term.

Let's say you have $10,000 in credit card debt. Here's a typical difference between paying that off as a credit card balance and using a personal loan to pay off the same amount.

Illustrative example only.

In this case, a personal loan provides you with lower total costs and more affordable monthly payments.

When a personal loan may not be the right fit

A personal loan isn't the right move for everyone, and it helps to know the trade-offs before you decide. Here are a few things to weigh:

• Origination fees are high. Some lenders charge an origination fee, a one-time fee they take out of your loan amount before you get the funds. These can reach up to 12% of the loan amount, so factor that into your savings calculations.

• You aren't eligible for a lower rate. A personal loan for debt consolidation generally only saves money if its rate is lower than your current card rate.

• You keep old spending habits. A loan doesn't fix overspending, so total debt can grow if you build up new card balances after you consolidate.

None of these may be dealbreakers on their own, but they're worth weighing so you can decide with confidence.

When a credit card balance transfer card may be a good debt strategy

A credit card balance transfer could be a good debt repayment strategy if you:

• Qualify for a card with a 0% APR for transferred balances

• Can definitely pay off the transferred amount within the 0% APR period

• Are confident you won't get deeper into credit card debt

• Can save money even after paying the balance transfer fee

Balance transfers may end up being expensive, because you pay an upfront balance transfer fee, then a high interest rate if you don't pay off the full balance before the 0% rate ends.

Here's an example: Let's say you owe $10,000 in credit card debt. Here's how a balance transfer card might look when you pay the balance off before the end of the 12-month 0% rate period, versus when you make lower payments and don't meet the deadline:

If you can make high-enough monthly payments, you pay off your debt in just 12 months with the balance transfer card. That's much shorter than the multiple years of payments with a personal loan. But payments that might be nearly four times as much as the loan payments could be a real stretch.

You could also risk getting more deeply into debt. Having a new credit card means more available credit. If you charge up your cards again, you owe money on the old card and the new balance transfer card.

How to compare credit card and personal loan debt

In some cases, a personal loan could make more sense than a credit card. The best way to pick the right approach is to run the numbers. Compare a few things:

• Loan and balance transfer fees

• Monthly payments

• Total interest

• Balance transfer offer available to you

• Your payoff timeline

If you qualify for a good 0% APR offer, a balance transfer could be useful. If you need more time than a balance transfer promotional deal provides, a personal loan may be the better fit. The same is true if you're not sure you can pay off a card in full before the offer expires.

Achieve Personal Loans could be a good place to start when you're weighing a personal loan for debt consolidation.

What's next?

Now that you understand the difference between a personal loan vs. credit card debt, including balance transfer debt, here are some good next steps.

• Check your rates. You can prequalify through Achieve Personal Loans to check your estimated personal loan rate. Achieve Personal Loans uses a soft credit inquiry for prequalification that won't impact your credit score.

• Compare a balance transfer by checking the 0% APR period, the transfer fee, and the payment amount you'd need to clear the balance before the promo ends.

• Make a budget to check whether you can cover your personal loan or balance transfer payments while avoiding getting deeper into debt.

Whichever path you choose, you should have the information to move forward with confidence.