Key takeaways
- A personal loan has a fixed term and set repayments, so the debt is actually paid off by a known date.
- A balance transfer card can be cheaper, but only if you clear the balance before the promotional rate ends.
- Closing old cards after consolidating matters. Lenders count your card limits, not just balances.
- If you own a home, rolling debt into your mortgage may be cheaper per year but can cost more in total.
Weighing up a personal loan? See how we compare personal loans.
How does each option work?
A debt consolidation personal loan pays out your existing debts and replaces them with one loan, usually over one to seven years, with a fixed or variable rate and set repayments.
A balance transfer credit card moves existing card balances onto a new card with a low or zero promotional rate for a set period. After that, the balance reverts to the card's standard rate, which is usually high.
At a glance
| Personal loan | Balance transfer card | |
|---|---|---|
| Rate | Fixed or variable for the term | Low promotional rate, then high revert rate |
| End date | Set by the loan term | None; the card stays open |
| Covers | Cards, loans, BNPL and other debts | Usually card balances only |
| Best for | Larger debts needing a few years | Smaller debts you can clear quickly |
Which is cheaper?
If you can clear the full balance within the promotional period, a balance transfer is often cheaper. If you can't, the revert rate usually makes it the more expensive option. Check any balance transfer fee and the annual fee, and remember that new purchases on the card may not get the promotional rate.
What about your borrowing power?
Home lenders count a percentage of every credit card limit as a monthly commitment, whether you use it or not. Consolidating into a personal loan and closing the old cards can improve your position, although the personal loan repayment also counts. Opening a new card without closing others can make things worse. See credit cards and your borrowing power.
Should you use your home loan instead?
If you own a home, adding debts to your mortgage usually means a much lower rate. But stretching a short-term debt over 25 or 30 years can cost more in total interest unless you pay it down faster. We show you both numbers. See debt consolidation, done honestly.
Make it stick
Consolidation works when it's a reset: consolidate once, close or reduce the limits you've paid off, and set a repayment you can hold. Your credit file and future borrowing power both benefit.
Compare your consolidation options
We'll compare a personal loan, a balance transfer and your home loan side by side, with the total cost of each.
Book your free game plan callGeorge Karpathakis, Co-Founder & DirectorYour enquiry comes straight to our team. We usually reply within one business day.
Frequently asked questions
Does consolidating debt hurt my credit score?
Applying adds an enquiry. Over time, paying on time and closing unused limits usually helps.
Can I consolidate buy now pay later debts?
Yes, a personal loan can pay out BNPL balances. See buy now pay later and your mortgage.
Should I close my credit cards after consolidating?
Usually, yes, or at least reduce the limits. Lenders count the limit as a commitment.
The 7 things every lender checks before they say yes
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This guide is general information only and does not take your personal circumstances into account. It is not financial, credit, tax or legal advice. Examples are illustrative only. Government schemes, lender policies and rates change over time and eligibility criteria apply. Speak with us for advice tailored to your situation. LendQuest Pty Ltd is a credit representative (555514) of BLSSA Pty Ltd, Australian Credit Licence 391237.