Balance Transfer or Personal Loan - Which one is better ?

The choice between a balance transfer card and a personal loan lies entirely on the types of debt that you have. In case you are planning on consolidating and paying off different types of debt, a personal loan might be the most flexible option for you. A personal loans brings a lump sum to your bank account. You are free to decide how you want to utilize it.

Balance transfer cards, on the other hand, are often restricted to a particular type of debt, usually credit card debts. However, some card issuing companies cannot do a balance transfer to their own credit cards. Moreover, a very few card issuing companies allow you to transfer other types of debts (like a student loan, mortgage or auto loan)
Rate of Interest

Personal loans barely offer zero interest promotional or introductory offers, but the interest rates might be lower than your credit card's APR. Alternatively, a balance transfer card could be your cheapest and most ideal option if you can repay the entire debt within the introductory period as most balance transfer cards offer a low or even no interest scheme for a limited period in the beginning.

However, if you take a balance transfer card but do not settle all your debt within the introductory period, you could end up paying a higher APR which might even be more than the APR of your old credit card.
Credit Score

When you apply for a new line of credit, the lender will make a hard inquiry which will slightly bring down your credit score. This inquiry will stay in your report for a long time, but your credit score will recover within a year.

A personal loan will add variety to your accounts, which is good for your credit score. You won't get this advantage from a balance transfer credit card. On the other hand, a balance transfer card will add to your total credit limit and bring down your credit utilization rate, which will boost your credit score.

If you pay off outstanding balances in several credit cards and move the debt to a new loan or credit line, it will reduce your utilization rate and shoot up your credit score. However, closing these credit card accounts may negatively impact your credit score. It entirely depends upon how you handle the new loan or credit card. That being said, weigh the consequences before you make a choice.

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