Debt consolidation can be a smart way to take control of your finances, especially when you want to reduce your interest costs or simplify your repayments. But one question often comes up:
Balance transfer credit card vs personal loan — which option is right for you?
The answer depends on several factors: how much debt you’re carrying, your repayment goals, your credit score and how disciplined you are with repayments. Below, we explore both options in detail to help you decide with confidence.
Choosing a credit card loan vs a personal loan
First and foremost, why are you looking at consolidating your debts?
You might simply be looking to make your finances more manageable. Maybe you want to consolidate debts to free up cash to buy a new car or another big-ticket purchase. Perhaps you’re keen to get on the property ladder in the next few years, and debt consolidation is the first step on that journey.
When it comes to consolidating credit card debts, you’ll typically find yourself with the choice between consolidating onto a balance transfer credit card or using a personal loan. Whatever option you choose, you’re undoubtedly looking to consolidate your debts quickly so you can get moving towards your financial objectives.
While the best approach will be specific to your circumstances and needs, the considerations you should make are essentially the same.
Using a personal loan to consolidate your debts
The personal loans landscape has changed significantly in recent years. The market is more competitive, giving you a wider choice of lenders and loan products. And, features like our own Get My Rate mean you can discover if you’re eligible for a loan and what your interest rate will be before you apply.
Knowing what you’ll pay after consolidating your debts is vital. You want debt consolidation to improve your interest rate, reduce your repayments and shorten the time it takes you to become debt-free. Getting your rate before you apply means you can knowingly tick all those boxes without affecting your credit score!
For many Australians comparing a credit card loan vs personal loan, personal loans often offer greater clarity, structure and long-term value. While some may look at how a balance transfer works as an alternative, a personal loan provides fixed repayments, a defined end date and may offer fewer surprises over time.
What are the potential benefits of using a personal loan for debt consolidation?
Personal loans can be ideal for consolidating high balances or if you are looking to consolidate several credit card accounts. Also, debt consolidation loans give you a “debt-free” date as you’ll be making consistent payments over a defined time period. Contrast this to a credit card, where you’re making the minimum repayment and have no idea when you’ll be debt-free!
Another big benefit is you might be able to use your personal loan to both consolidate debts and finance a big-ticket purchase like a car, and still have all the benefits of just one loan and repayment to manage.
A loan will typically give you a more suitable timeframe to pay off your debts than a credit card. For example, you could get a personal loan and pay it off over seven years. You’re never going to find a balance transfer credit card offering 0% interest for that long!
What are the potential drawbacks of using a personal loan for debt consolidation?
If high debt levels have affected your credit score, you might find it challenging to get a personal loan that significantly lowers your interest rate. You’ll always pay interest on a personal loan, although it at least won’t create revolving debt in the same way a credit card does.
You are locked into making the same minimum repayment each month. While this is great for budgeting, you might prefer the flexibility of choosing what to pay on a credit card. However, with NOW Finance you can make as many additional repayments as you like, and even pay off your loan early with absolutely no fees for doing so. Not all personal loans offer that level of flexibility, so be sure to check.
Using a credit card balance transfer to consolidate your debts
If you’ve been a credit card user for several years, you might already be familiar with using balance transfers, although you may not have thought of them as debt consolidation!
Most credit cards offer a promotional 0% interest period on balance transfers and some credit cards will also offer 0% interest period on purchases, which may be helpful if you’re looking to make a big-ticket purchase. However, be aware that you’ll generally pay a fee for the privilege of making a balance transfer.
You’re unlikely to get a starting credit limit that is anywhere near what you could borrow via a personal loan. This may limit the debts you can consolidate and potentially make a big-ticket purchase unaffordable.
0% promotional balance transfer rates will usually last 24 months at the very most, and can be much shorter. Once the promotional period expires, you could end up in a worse position than previously, depending on the interest rate and the repayments you’ve made, if you can’t consolidate again.
It can be challenging to have the discipline to pay more than the minimum payment each month, increasing the risk of a significant balance at the end of the promotion.
How does balance transfer work?
A balance transfer involves moving your current credit card balance onto a new credit card that offers an introductory 0% interest rate for a fixed period.
Here’s how it typically works:
- You apply for a new balance transfer credit card.
- Once approved, you transfer your existing credit card debts.
- You repay the balance over the 0% interest period (usually 6–24 months).
- After the promo ends, any remaining balance starts accruing interest at the standard rate (often 18–22% p.a.).
This strategy only works if you pay off the full amount before the interest-free period expires.
Balance transfer credit card vs personal loan: Quick comparison
When should you use a personal loan?
A personal loan may be a better fit if:
- You have multiple debts across cards and accounts
- You want a longer repayment term and structured repayments
- You’re also planning a large purchase (e.g. a car or renovation) as you can use a personal loan for multiple purposes in the one loan
- You want predictability and a fixed end date
- You want to lock in a competitive interest rate without surprise fees
- You’re comparing secured and unsecured loan options to suit your financial goals
These scenarios highlight how personal loans offer structure, flexibility and long-term value — especially when you’re consolidating higher balances or planning a significant purchase. If your goal is to simplify repayments, lock in a competitive rate and move toward financial stability with confidence, a personal loan may be the smarter option.
Common mistakes to avoid
Whether you choose a personal loan or credit card loan, be cautious of:
- Failing to pay off a balance transfer before revert rates apply
- Using a personal loan, then continuing to use old credit cards
- Underestimating your total debt or misjudging your budget
- Not reading the fine print (e.g. hidden fees or early repayment penalties)
- Falling back on payday loans or early pay services to cover gaps — these can worsen debt
- Assuming all lenders offer the same terms — they don’t
The key is to treat debt consolidation as part of a broader financial strategy — not just a quick fix. Comparing a credit card loan vs personal loan carefully can help you avoid these mistakes and make a decision that aligns with your long-term financial goals.
Consolidate your debt quickly with a no-fee loan from NOW Finance
All NOW Finance personal loans are fee-free, adding even more value and benefits to your debt consolidation!
- Fixed rates from 5.95% p.a.
- Loan terms from 18 months to 7 years
- Borrow $5,000 to $100,000
- Fast approvals — funds in as little as 24 hours
- Make additional repayments at any time – no penalty
Discover whether you’re eligible for a personal loan and get your interest rate before you apply. Getting your rate won’t affect your credit score, and you’re under no obligation to apply. However, if you decide to go ahead, you could have your loan settled and debts consolidated in a matter of days!
Check your personalised rate today — it won’t affect your credit score.
Disclaimer: This article contains factual information only and does not constitute financial advice, a recommendation, or an offer of any kind. It has been prepared without considering your personal objectives, financial situation, or needs. Before taking any action, you should assess whether the information provided is appropriate for your circumstances. If this article discusses the acquisition or potential acquisition of a specific credit product, you should obtain and review the relevant disclosure documents before applying. The information is believed to be accurate as at the date of publication; however, changes in circumstances after this date may affect its accuracy.
