Personal loan vs. 0% APR credit card: Which is better for debt consolidation?

How personal loans and 0% APR credit cards can get you out of high-interest credit card debt and back in good financial shape. (iStock)

Massive amounts of credit card debt can be nerve-racking. You may have enough income each month to pay your mortgage, utilities, and other necessities, but little left to pay off credit cards.

You’re not alone. Credit card debt in the U.S. was just about $890 billion in the first quarter of 2020, according to Statista

Two of the most common methods to wipe out credit card debt are a personal loan or opening a 0% APR credit card — but which is really better for debt consolidation?

A 0% APR credit card gives you a way to consolidate debt or transfer an existing balance and pay no interest throughout the introductory period. Most personal loans are unsecured — which means you’ll need no collateral to get a loan from a bank, credit union or online lender. But you may need good credit to qualify. Personal loans are paid back in fixed monthly payments for a predetermined amount of time, usually 12 to 60 months. 

So which is best depends on your personal needs. 

Personal loans for debt consolidation

Paying off debt with a personal loan has advantages and disadvantages. Some lenders have put stricter requirements on who will and who won’t qualify for a personal loan due to the coronavirus pandemic. Others have introduced small-dollar loans at low rates if you’ve been impacted and fallen on hard times financially. Even so, if you don’t have good to excellent credit and a strong financial history, it may be a lot harder to qualify. 

Remember: You can explore all of your personal loan options by visiting Credible.


You’ll have a fixed repayment timeline. Personal loans have fixed repayment terms that can range from about one to five years. That makes it easy to budget and plan your pay-off date long in advance. 

You can lock in a low-interest rate. Annual percentage rates (APRs) for personal loans range from about 6% to 36%. Keep in mind rates can increase even if you were given an initial “teaser rate” when you secured the loan, per the Consumer Financial Protection Bureau. Credible can show you the rates you currently qualify for — just plug in your information.


You can rest easy with an unsecured loan. Most personal loans are unsecured, meaning there is no collateral needed to guarantee the loan. Some personal loans, however, are secured, so if you miss payments, you could lose your collateral. 

There's the potential to improve your credit score. Using a personal loan to consolidate your debt can help lower your utilization rate — how much of your available credit you’re using at any given point — and raise your credit score if you make your payments on time. You can make the process a whole lot easier by visiting Credible, which lets you compare personal loan quotes from multiple lenders in as little as two minutes. Plus, it doesn't affect your credit score.



You may pay a higher interest rate. Average APRs on personal loans are about 6 percent to 36 percent. If you have good credit, your APR will likely be less. But if you’ve missed payments in the past, you may end up paying a higher interest rate, in the 29%-35% range. 

Visit Credible to use their personal loan calculator and find the best personal loan rates.

You might end up paying fees. Some lenders charge processing or origination fees to take out a personal loan. These charges can add up, increasing the amount you’ll owe on the loan. Some lenders also charge prepayment penalties for paying off your loan early. 

You might be required to put up collateral. Most personal loans are unsecured, meaning no collateral is needed to qualify. However, some lenders require collateral as a guarantee for the loan. If you miss a payment you might forfeit your collateral.

0% APR cards for debt consolidation

Using a 0% APR card for debt consolidation or balance transfer can be a better option than a personal loan. But not always. If you have debt on multiple cards and need time to pay off your balances, a credit card with a temporary 0% APR might not be the best option. But if you have a plan to pay off the balance quickly or want access to funds through a revolving line of credit, a low or 0% credit card might work out. 

Before the pandemic, banks were approving about 200 million 0% APR balance transfer cards every month. Since then, that number has dropped dramatically, according to a Federal Reserve Bank of Philadelphia report.

Credible can help you find the right credit card for you. Choose zero percent credit cards and get a breakdown of the annual fee, welcome offers, credit needed, and more.



You’ll get low or 0% interest for a promotional period. During the promotional period, you will pay low interest or 0% interest on all transferred balances and new purchases. You can visit Credible to compare different zero percent credit cards and find your perfect match.

You can consolidate your debt: A low or 0% interest card lets you transfer balances from high-interest cards so you can consolidate debt into one low monthly payment. 

You might earn rewards. With some 0% credit cards, you also earn rewards and other perks.  

May be ideal for a large purchase. If you plan to make a large purchase, a 0% interest card may be an option to consider if you plan to pay off the balance before the temporary promotional period ends.



Your low or 0% APR is temporary. If you pay off the balance before the promotional period ends, this is a good option. Otherwise, you will incur interest. 

You might pay fees. You might pay a balance transfer fee that can be as much as 3%-5%. There may also be other fees that can add up. 

You might not qualify. If you have good to excellent credit, your chances are good. However, if your credit is less than stellar, you may not qualify, especially during the pandemic.

You might forfeit your 0% APR. If you make late payments or miss payments, you may lose your 0% APR and end up paying high interest. 

Visit an online marketplace like Credible to view multiple 0% APR credit card options all in one place. 


Should you use a personal loan or 0% APR credit card to consolidate debt?

Using a personal loan to consolidate debt can be a good option if it comes with a low APR and favorable terms. Most personal loans are unsecured and you can usually lock in your rate.

On the other hand, a low interest or 0% loan may be best if you plan to pay back your debt quickly. You’ll pay no interest during the promotional period, but there is the possibility you’ll end up paying high fees.