paying off debtUpdated: Dec. 21, 2018

Living with debt can put you under a lot of pressure, especially if that debt has high interest. While you could opt to settle your debt or file bankruptcy, there are other ways for you to pay off the debt before getting to those extreme options. These alternative options include transferring your balance to a balance transfer credit card and consolidating your balance with a personal loan. Both of these processes can lower your payments, reduce your interest and give you some much-needed time to pay your balances. Which option is better for paying off debt? It really depends on your circumstances. To learn more about balance transfers, personal loans and how they can help you with your debt, read on.

Balance transfers

What is a balance transfer?

A balance transfer is a credit card transaction that lets you move debt from one credit card to another credit card (usually a new one) in order to take advantage of low or 0% credit card interest rates. Usually, people use balance transfers to shift around debt from other credit cards, but some credit card providers let their cardholders transfer balances from other sources, such as loans. While you can transfer a credit card balance to almost any credit card, balance transfers give you the most debt relief when you use them to transfer a balance to a newly-opened card with a 0% intro APR balance transfer period. Transferring your debt to a card like this can help you avoid interest for one to two years, giving you time to make payments on your debt’s principal and saving you money. Balance transfers often cost a one-time balance transfer fee, which is typically 3% to 5% of the amount you’re transferring, though some cards waive this fee under certain conditions.

When is it best to transfer a balance?

Balance transfers work best when you have less than $10,000 in debt, and that debt is mostly on other credit cards. This is both because the amount of money you can transfer is typically capped by your new balance transfer card’s credit limit, which will on average be under $10,000, and because transferring lower amounts of debt will give you a better chance of paying it all off by the time the balance transfer intro period runs out. Carrying debt past a 0% intro APR period won’t hurt you, but it will somewhat defeat the purpose of the balance transfer, as the interest you have to pay on your remaining debt will probably be fairly high. Ultimately, if you pay off the majority of the balance during the 0% intro APR period, leaving you with a month or two of interest payments, you’ll likely still end up money ahead in the long run.

What are the best balance transfer cards?

Wells Fargo Platinum Visa Card

paying off debtThe Wells Fargo Platinum Visa Card is one of the best balance transfer cards we’ve reviewed, as it offers a long 0% intro APR on purchases and balance transfers and offers a unique perk. Its 0% intro APR period is a solid 18 months for both balance transfers (with a 3% intro balance transfer fee for 120 days, then it’s 5%) and purchases. On top of that, the Wells Fargo Platinum Visa Card, which is available to those with good to excellent credit (usually considered a credit score of 700 or higher), has no annual fee and offers mobile protection of up to $600 against covered damage or theft to cardholders who use their Wells Fargo Platinum Visa Card to pay their monthly cell phone bill. Note that there’s a $25 deductible per claim and a maximum of 2 claims per year.

Citi Simplicity Card – No Late Fees Ever

paying off debtIf you’re looking to get the longest 0% intro APR period you can find, the Citi Simplicity Card – No Late Fees Ever (a NextAdvisor advertiser) has you covered with a 21-month 0% intro APR on balance transfers made in the first 4 months. Unfortunately, it comes with a somewhat high balance transfer fee of 5% of each transfer with a $5 minimum, but the super long 0% intro APR will likely make up for that, especially when you calculate how much you’d pay in interest with your current credit card. Additionally, the Citi Simplicity Card offers some extra perks such as a free Equifax FICO score every month and the ability to choose your payment due date, so you can pay your bill at a time that’s most convenient for you. It also has no annual fee and is available to those with good to excellent credit (usually considered a credit score of 700 or higher).

Discover it Balance Transfer

paying off debtWhile the two previous cards require good to excellent credit to qualify, the Discover it Balance Transfer is a bit more forgiving, requiring average to excellent credit, which is typically considered a score of 670 or above. Its 18-month 0% intro APR period for balance transfers (with a 3% balance transfer fee) is very nice, and it also offers a 6-month 0% intro APR on purchases (after the 0% intro APRs expire, the go-to variable rate applies). What’s more, Discover it Balance Transfer earns 5% cash back on purchases in categories that rotate every quarter (on up to the quarterly maximum, currently $1,500 in purchases, then it’s 1% back) and 1% cash back on all other purchases. You’re required to activate the 5% cash back categories every quarter, but Discover will remind you when it’s time. What’s more, at the end of your first year as a cardholder, Discover will match all of the cash back you’ve earned. This means if you earn $300 in the first year, Discover will match that to give you a total of $600 back! Other perks of the card include no annual fee, no balance transfer fee and a whole host of added perks.

Personal loans

What is a personal loan?

Personal loans are unsecured loans that you pay back in monthly installments over a set period of time. They don’t require much paperwork, get processed fairly quickly and can be used for pretty much anything, including to pay off debt. Personal loans can be funded by a financial institution, such as a bank, or they can be peer-to-peer, where the personal loan service connects you with independent lenders who fund your loan request. In addition to interest, which for personal loans can be anywhere from 5% to 36% and tends to depend heavily on your credit history, some personal loans also have origination fees, which are one-time fees of 3% to 8% of the loan total. If your personal loan has an origination fee, be sure to factor that into the amount of money you request.

When is it best to get a personal loan?

Personal loans are a really flexible form of debt relief, and you can typically get more funding from a personal loan than you can from a balance transfer, but on the downside, you’re going to have to pay interest. Due to this, personal loans work best for consolidating high-interest debt, as well as debt that must be paid in cash. Also, since your credit score plays a large role in determining how good your APR will be, having high credit scores will make personal loans a better option for you. Our friends at Bankrate have some tools to help you determine if a personal loan is right for you.

Owing money can feel like having a dark cloud hanging above your head, but the right kind of option to repay your debt can help you clear the skies. For more information on debt and how you can get rid of it, follow our personal finance blog.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.