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If you’re looking to free yourself from high-interest credit card debt, you have lots of options to explore. Among the most popular are balance transfers and personal loans, but how do you choose?

There are benefits to both, but they also differ significantly. Read on to learn how they compare, so you can make an informed decision and maximize your savings.

Defining terminology

Simply put, a balance transfer is when you move the balance from one or more credit cards to a card with a lower interest rate. For example, you might move higher-interest credit card debt to a card with a 0% introductory annual percentage rate, also called an APR.

A personal loan, by comparison, is a type of installment loan designed to help people consolidate debt or pay for larger or unexpected expenses—like a home renovation, vacation, wedding, or back taxes.

Personal loans (and credit cards) are unsecured, which means you don’t need any collateral to obtain the funds.

The main differences between balance transfers and personal loans

Now that you have a general understanding of what balance transfers and personal loans are, you can see how they differ in ways that matter most and decide which one is better suited for your current situation.

Here’s how personal loans and balance transfers can compare on interest rates, fees, and loan amounts:

This table lays out how personal loans and balance transfers differ in terms of interest rates, fees, loan amounts, and benefits.

Balance transfers work well for smaller debts you can pay off quickly

A balance transfer could be a great tool for debt consolidation, especially if you can pay off the balance on the new card before the promotional interest rate expires. If you do not repay the balance in full before the promotional rate ends, APR can increase significantly, possibly putting you back where you started: with a large chunk of high-interest debt you might struggle to pay off.

Learn more about the differences between interest rates and APR.

One way to determine if a balance transfer is a good idea is to figure out how much you can afford to pay each month. Then divide your total debt by that monthly payment. This will tell you how long it will take you to pay it down.

If you find you’ll need to make 12 payments, for example, a balance transfer to a credit card with an introductory 0% APR for a year might be ideal. Just don’t forget about fees, because they are added to your balance and can accumulate quickly: You’ll have to pay a fee for each credit card balance you transfer.

Also, make sure to check that the credit limit on the new card is high enough to accommodate all the balances you want to transfer. For example, $20,000 worth of debt might be too much to transfer.

To pay off larger debts over time, personal loans shine

While personal loans don’t offer 0% interest rates, one big advantage is their fixed APR. Your interest rate will never change, and because you choose the term and monthly payment that fits your budget, you’ll have peace of mind knowing exactly when you’ll be debt-free.

Personal loans can work very well for higher-interest credit card consolidation, but it’s still wise to research and compare lenders so you can minimize your costs. Some lenders charge origination fees, for example, while others, like Discover Personal Loans, don’t charge fees, closing costs, or prepayment penalties.*

In addition, because many lenders offer loans only in larger amounts, a personal loan might be an ideal way to consolidate larger debts that will take you more than a year to pay down. With a Discover personal loan, you can apply for any loan amount from $2,500 to $35,000.

Which is best for me, a balance transfer or a personal loan?

When deciding between a balance transfer or personal loan, choose the one that will do more to help you reach your financial goals.

For lower debt balances that you can comfortably pay off in one to two years, a balance transfer might be the best solution. With an introductory 0% APR, you can save on interest in the short term.

But for higher debt balances of $2,500 or more, a personal loan might be the better option. A fixed interest rate, a set regular monthly payment, and a loan term of your choosing ensure you can pay down debt in a way that fits your budget and still allows you to save. What’s more, you could save hundreds, even thousands, of dollars in interest over time.

See what you could save in interest when you consolidate higher-interest debt with a loan from Discover Personal Loans.Debt Consolidation Calculator