Debt Rescheduling Loan vs. Balance Transfer: Which is Right for You?

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A debt consolidation loan and balance transfer can help you consolidate high-interest debt. Learn how they compare. (Shutterstock)

Debt consolidation combines multiple debts into a single account. It can help you save money, lower your monthly payments, and streamline your payout process. While you can consolidate debt in a variety of ways, Debt Consolidation Loans and Balance Transfers are the most common.

Here’s what you should know about each one so you can determine the ideal debt consolidation strategy for your unique situation.

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Debt Rescheduling Loan vs. Balance Transfer: What’s the Difference?

Both debt consolidation loans and balance transfer credit cards are lending products that you can use to consolidate other debt with higher interest rates. Here’s a closer look at how each one works.

What is a Debt Consolidation Loan?

A Debt Consolidation Loan is a type of unsecured personal loan. When you take out one, you get a flat rate up front. You then pay back the borrowed money in fixed monthly installments over a set period of time. While loan amounts vary, they can range from $1,000 to $100,000.

If you have various types of debt that may take several years to pay off, a debt consolidation loan is worth considering.


What is a balance transfer credit card?

Funds transfer credit cards allow you to transfer funds from your current maps to a new card, usually with a 0% APR introductory period, which can range from six to 18 months. Paying off your debt in full before the end of this introductory period can save you a lot in interest. However, remember that after the period has expired, interest will accrue on the remaining balance on the card and credit cards can have high interest rates.

When you have a lot Credit card debt with high interest rates and you can pay it off during the introductory period, a prepaid credit card can make sense.

Pros and cons of a debt restructuring loan

Before deciding on a debt consolidation loan, consider these pros and cons:


  • You can use a debt consolidation loan to consolidate multiple types of debt such as: credit card debtMedical bills and other personal loans.
  • Some lenders pay your creditors directly so you don’t have to, simplifying the debt settlement process.
  • A remortgage loan usually carries a lower interest rate than a credit card.
  • You have a clear payout date and can budget accordingly.

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  • If you don’t have the best credit, it can be difficult to get a lower interest rate than what you’re currently paying.
  • Some lenders charge processing fees, prepayment penalties, and other fees when you take out a debt consolidation loan.
  • There is no introductory period with 0% APR like some credit cards offer.
  • If you don’t make your payments on time every time, your credit can suffer.


Pros and cons of a balance transfer

Here are some pros and cons to think about before deciding to transfer your balance:


  • You may qualify for a 0% APR introductory period, which could save you hundreds or even thousands of dollars in interest.
  • Some cards offer rewards such as cashback and travel points.
  • Opening a new card can lower your credit utilization ratio (how much credit you use compared to your available credit) and in turn improve your credit score.


  • If you don’t pay off your debt before the end of the 0% APR period, you could face high interest charges.
  • Some cards charge a transfer fee of 3% to 5% of the amount transferred.
  • You may not qualify for a balance transfer credit card unless you have good credit.

What should be considered when consolidating debt?

When comparing a debt consolidation loan and a balance transfer, consider the following factors:

  • Interest rate (amount and type) — The interest rate is the price you have to pay to borrow money. It can be fixed and remain the same or variable and fluctuate depending on market factors. The lower the interest rate, the better.
  • Effective interest rate – APR stands for APR and refers to how much you are actually paying on the loan or credit card, including your interest rate and any fees. If you qualify for a balance transfer card with a 0% introductory period and can withdraw your balance before it expires, a balance transfer may be a cheaper option.
  • Fees – fees for a debt consolidation loan, processing fees and prepayment penalties may be included. A balance transfer fee of 3% to 5% of the amount you transfer is common with a balance transfer credit card.
  • Creditworthiness Requirements — You likely need good or excellent credit to qualify for a credit card or personal loan. The good news is that some personal lenders have more lenient credit criteria.
  • Types of debt you consolidate – You can use a personal loan to consolidate multiple types of debt, such as medical bills and credit cards. However, a transfer credit card is designed for high-interest credit card debt.

Where to get a debt consolidation loan

You can get a debt consolidation loan from a bank, credit union, or online lender. While banks and credit unions typically offer competitive interest rates, they typically have stricter requirements than online lenders. You must also join a credit union before taking out a loan there.

If your credit is preventing you from getting a debt consolidation loan, you should apply to a co-signer who has a good credit history or take the time to improve your credit before you apply.

When you’re ready to apply for a debt consolidation loan, Credible can help you quickly and easily Compare personal loan rates to find one that suits your needs.

Where to get a credit transfer card

Many banks and credit card companies offer balance transfer credit cards. If you’re having trouble qualifying for one, check your credit reports and dispute any errors. Also, focus on making your payments on time and do your best to pay off some of your credit card debt to improve your credit utilization.

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