5 Reasons to Choose a Debt Consolidation Loan vs. a Balance Transfer Card
- A debt consolidation loan provides a clear path to get out of debt, with a fixed payment and payoff timeline.
- Debt consolidation loans are an option even if you don’t have a high credit score.
- You may find it easier to stay out of debt with a debt consolidation loan instead of a balance transfer card.
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You’ve decided you’re done making several debt payments every month. You’re going to consolidate your debt and cut down the number of payments. This is often a smart financial move. It makes managing money easier. It could help you avoid missed payments, and it may even save you money.
But there’s more than one way to consolidate debt. You could get a debt consolidation loan you then use to pay off debt. Another option is a balance transfer card, a credit card that lets you transfer over balances from other accounts.
Either option could work, depending on the circumstances. But a debt consolidation loan has several advantages.
1. A Loan Gives You More Structure
When you get a debt consolidation loan, you choose how long a loan term you want. The lender sets a monthly payment based on the length of your loan and the interest rate. From the start, you know exactly how much you’ll pay every month, and how long it will take to pay off the entire debt.
Balance transfer cards don’t provide this same structure. You’re not required to pay off your balance within any specific time frame, and there’s only a small minimum payment due every month. But if you only make that minimum payment, you could spend far longer paying off your balance.
2. You Don’t Need Excellent Credit to Get a Loan
Balance transfer cards are generally aimed at people with high credit scores. There’s no specific cut-off point, but if you don’t have great credit, the card issuer might not approve your application.
It’s a different story with debt consolidation loans. Many lenders have flexible requirements, so you could get a loan even if you have a low credit score. If you’re a homeowner, you may also have the option of a home equity loan to consolidate debt. Your home is the collateral on this type of loan, making it easier to get approved.
To be clear, your credit score still matters when you get a loan, because it affects the interest rate. But debt consolidation loans are an option even without sterling credit, which usually isn’t the case with balance transfer cards.
3. A Loan Could Give You More Time to Pay Off Your Debt
Most balance transfer cards have an introductory period with a low interest rate. This usually lasts about 15 to 21 months, depending on the card. After the introductory period ends, the interest rate skyrockets, in some cases close to 30%.
If you don’t pay off your entire balance within the introductory period, it costs you a lot more money. With large amounts of debt, a balance transfer card might not give you enough time.
Debt consolidation loans are available for much longer, and the interest rate usually stays the same. The exact options depend on the lender, but many lenders offer personal loans ranging from three to five years. On the high end, a five-year personal loan gives you more than twice as much time as just about any balance transfer card.
4. You Could Use a Loan to Pay Off More Types of Debt
With a debt consolidation loan, you could pay just about any type of debt. Lenders normally deposit your loan directly into your bank account, giving you the flexibility to use it on any debt, from credit cards to student loans.
Balance transfer cards work differently. You need to transfer your debts onto your credit card, and the rules about what you can transfer depend on the card issuer. Some only let you transfer other credit card debt, not loans. Others let you transfer both.
5. A Loan Could Help You Avoid New Debt
Debt consolidation loans tend to work better for staying out of debt than balance transfer cards, because you can’t keep borrowing money with them. When you get a debt consolidation loan, it’s a one-time deal. You get the loan; you use it to pay off your debt; and you make the loan payments. Once you’ve finished paying off your loan, you’re done.
A balance transfer card lets you spend up to the credit limit. As you pay down your balance, you have more spending power. Imagine you get a balance transfer card with a $10,000 credit limit and make $10,000 in balance transfers. After a year and a half, your balance is down to $4,000, meaning you have $6,000 in available credit.
This is often how people get into trouble with balance transfer cards. They get a balance transfer card for debt consolidation, but then use it for spending, too. You don’t have this temptation with a debt consolidation loan, which could help you close the book on your debt.
A look into the world of debt relief seekers
We looked at a sample of data from Freedom Debt Relief of people seeking the best debt relief company for them during January 2026. This data highlights the wide range of individuals turning to debt relief.
FICO scores and enrolled debt
Curious about the credit scores of those in debt relief? In January 2026, the average FICO score for people enrolling in a debt settlement program was 593, with an average enrolled debt of $25,843. For different age groups, the FICO scores varied. For instance, those aged 51-65 had an average FICO score of 588 and an enrolled debt of $27,829. The 18-25 age group had an average FICO score of 556 and an enrolled debt of $17,051. No matter your age or debt level, it's reassuring to know you're not alone. Taking the step to seek help can lead you towards a brighter financial future.
Credit card debt - average debt by selected states.
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average credit card debt for those with a balance was $6,021. The percentage of families with credit card debt was 45%. (Note: It used 2022 data).
Unsurprisingly, the level of credit card debt among those seeking debt relief was much higher. According to January 2026 data, 88% of the debt relief seekers had a credit card balance. The average credit card balance was $16,010.
Here's a quick look at the top five states based on average credit card balance.
| State | Average credit card balance | Average # of open credit card tradelines | Average credit limit | Average Credit Utilization |
|---|---|---|---|---|
| Alaska | $18,904 | 7 | $24,102 | 81% |
| District of Columbia | $16,247 | 9 | $28,791 | 78% |
| Alabama | $13,021 | 9 | $27,261 | 78% |
| Oklahoma | $13,959 | 8 | $25,731 | 77% |
| Kentucky | $12,599 | 8 | $26,156 | 77% |
The statistics are based on all debt relief seekers with a credit card balance over $0.
Are you starting to navigate your finances? Or planning for your retirement? These insights can help you make informed choices. They can help you work toward financial stability and security.
Regain Financial Freedom
Seeking debt relief can be the first step toward financial freedom. Are you struggling with debt? Explore options for debt relief to regain control of your finances. It doesn't matter how old you are or what your FICO score or credit utilization is. Take the first step towards a brighter financial future today.
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Author Information
Written by
Lyle Daly
Lyle is a financial writer for Freedom Debt Relief. He also covers investing research and analysis for The Motley Fool and has contributed to Evergreen Wealth and Monarch Money.
Reviewed by
Kimberly Rotter
Kimberly Rotter is a financial counselor and consumer credit expert who helps people with average or low incomes discover how to create wealth and opportunities. She’s a veteran writer and editor who has spent more than 30 years creating thousands of hours of educational content in every possible format.
Do I lose my credit cards if I do debt consolidation?
No, you don’t lose your credit cards if you consolidate your debt. Debt consolidation is when you pay off accounts with either a debt consolidation loan or a balance transfer card. There’s no negative impact on the accounts you pay off. Your credit cards remain open unless you (or the card issuer) close them.
What should I avoid in debt consolidation?
Avoid getting into more debt during or after debt consolidation. Focus on paying off your consolidated debt and staying debt-free going forward. If you overspend because you feel like your debt is under control, you could end up in the same position as before.
What credit score is needed for debt consolidation?
There’s no minimum credit score for debt consolidation, although your credit does affect the options available. Debt consolidation loans are an option for most people, including those with low credit scores. Some lenders don’t have minimum score requirements to get a loan. Balance transfer cards, on the other hand, are typically aimed at people with good or excellent credit.