Balance Transfer or Personal Loan – Which Is Better for Paying Off Credit Card Debt?


Credit cards are great – if you use them responsibly. But sometimes, the temptation to spend on a new designer handbag, European holiday, or nightllife indulgence is just too greatand the end result is a bill that’ll take 6 months or longer to pay off.

The last thing you want is to pay off credit card debt with a 24%+ interest rate attached to it! And the best way to avoid that is either using a balance transfer or personal loan. Yet which option should you take? Let’s find that out together.


#1 Using a Balance Transfer

Using a credit card to pay off another credit card sounds counterintuitive – but it’s an effective way to eliminate your credit card debt without paying a ridiculously high interest rate.

Let’s say if you’re making minimum payments of 3% of the balance or $50 (whichever is higher) on $10,000 in credit card debt at 24% interest – it will take 19 years to pay off, costing you $7,773.90 in interest.

Balance transfers on the other hand enable you to pay down your credit card debt with 0% interest over a 6- to 12-month period. However, the interest rate will revert back to its normal rate after the period ends.

Here’s a look at how much a balance transfer can save you on interest over 6 months

BT -1                          *You can find more information on credit cards offering balance transfers here.

Only use a credit card balance transfer if your debt is manageable! If you can afford to make the fixed payments needed to pay off your debt during the 6- to 12-month interest-free period – it’s manageable.

If you’re interested in learning more (especially if you used your credit card frequently during CNY), check out this article.


#2 Using a Personal Loan

Using a personal loan to pay off your credit card debt can be a smart move – as long as you’re borrowing from a licensed moneylender, not an Ah Long.

Unlike balance transfers, which offer 0% interest periods for 6 to 12 months, some personal loans offer interest rates as low as 4.98% over a loan tenure ranging from 1 to 7 years!

That makes personal loans handy for paying off big purchases you may have made with your credit cards.

Here’s a look at how much a personal loan can save you on interest over 3 years:

ploan                               *The calculations above are based on interest rates of ANZ MoneyLine Term Loan.

Another bonus point to this is that some moneylenders will give out welcome gifts! Apart from those normal shopping vouchers, moneylender like ANZ even gives out latest gadgets like a ASUS PadFone (worth S$449) or Polar A300 Fitness & Activity Trackers (worth S$259)!

To compare apples to apples, you will save S$1,650 (S$9,900/6) on interest with a personal loan compared to S$1,900 with balance transfers on a 6-month basis. However, only use a personal loan if your credit card debt is unmanageable!

If you can’t afford to make the fixed payments needed to pay off your debt in 6 to 12 months – it’s unmanageable. Then it makes sense to go for a personal loan that’ll give you 24 to 60+ months to pay it off at a low interest rate.

Back to square one, deciding on whether to utilise a balance transfer or take out a personal loan ultimately depends on your financial situation and means.

So before you choose, analyse how much you owe, how much you can afford to pay back over a 6- to 12-month period. Once you evaluate those factors, the choice is usually clear.

Don’t despair – if this guy can pay off his RM58,000 study loan using just credit card balance transfers and a whole lot of discipline – you can clear up your debt too!


For more financial tips and tricks to optimise your financial lifestyle, visit and learn all the best moves to make with your money.



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