Debt Consolidation Loan vs. Balance Transfer Credit Cards: Which Is A Better Option For You?

Do you know debt is good? It’s one of the effective ways to build a credit history. The problem is, many people don’t know how to manage it effectively. With late to non-repayments, poor financing skills, and bad interest rates, it’s easy for the likes of you to be buried underneath it. The way to enjoy financial freedom is to get out of debt – fast. If you have accumulated a lot of them, perhaps it’s time to consider a debt consolidation program.

What Is a Debt Consolidation Program?

It is a debt repayment option where you can group together some or all your debts into one loan. It offers a lot of benefits from easy payment (since you have only one loan to think) to lower interest rates.

Another advantage is the choices available. Two of the most common are balance transfer and debt consolidation loan.

Image result for Debt Consolidation Loan vs. Balance Transfer Credit Cards: Which Is A Better Option For You?

Balance Transfer

This debt consolidation method is usually applied to credit cards. Consumer debt makes up one of the biggest financial problems of households in the United States. The current credit card debt of Americans is about $1 trillion – no kidding.

One of the biggest issues with credit card repayments is balance on unpaid interest. The more you don’t pay it or settle for just the minimum, the more you pay for the interest. It will continue to increase even if you don’t use your plastic very often.

To save yourself from the high interest rate, you can consider a balance transfer. You simply move your unpaid balance to another card with a very low interest rate. It can range between 0 and 5 percent.

But while this may sound like an exciting deal, there are limitations to it. One, you enjoy the low interest rate only up to a certain period. It may be 3 to 6 months. After that, it can go as high as 16 to 18 percent (or even more), which makes it more expensive to pay than a debt consolidation loan interest-wise.

Furthermore, not all issuers will allow balance transfers, and if they do, usually, you can do so only once.

Nevertheless, it’s a fantastic option if you have a small credit card balance you want to get rid of immediately, or a loan you think you can pay off within a few months’ time.

Debt Consolidation Loan

A debt consolidation loan can be either secured or unsecured. The major difference is the latter doesn’t require any collateral like a home or a car.

This is ideal if you have a bigger amount of total loans to pay, and you don’t mind settling them within the next few years. Note, though, these loans may start off with a fixed interest for a few years before they shift to variable interest rate.

Moreover, because secured loans have collateral, they often offer lower interest than unsecured ones. But if you want a fast repayment, an unsecured debt consolidation loan is a better choice.

Each of these has its pros and cons. If you are confused which ones to pick, talk to a debt counselor who can provide you with more information about these programs. Find out if debt consolidation loan is for you at or visit more resources for debt management at
Debt Consolidation Loan vs. Balance Transfer Credit Cards? Find out which is a better option for you at See what experts and fellow consumers are saying.

Jennifer Winget

Learn More →