Balance Transfer vs Debt Consolidation: Which is Best for You?

Choosing between a balance transfer or a debt consolidation loan? Discover how they differ, when to use them, and which one may suit your situation best.

Written by Hayley Bevan and Victoria Smith

Published: 04/09/25Published on September 4th, 2025

Last reviewed: 04/09/25Last reviewed on September 4th, 2025

7 mins read

A balance transfer and a debt consolidation loan are both common strategies for managing credit card or personal debt.

With both options, debt is consolidated into a single monthly payment which may support better budgeting and help you manage repayments more effectively.

Although balance transfers and debt consolidation loans help you manage what you owe in a simpler way, they both work differently. Let’s find out how to decide what is right for you.

What is the difference between a balance transfer and debt consolidation?

A balance transfer is when you transfer the balance from one or multiple credit cards to a single card, typically to take advantage of a 0% or low-interest introductory offer.

By transferring multiple pots of debt to a single place, this can help take stock of your finances, and be on your way to building better credit

Although a debt consolidation loan can help you reach the same outcome, it works differently by combining multiple debts into a single fixed-rate loan which is repaid over a set period of time.

A debt consolidation loan also gives you the ability to pay different types of debt such as store credit, overdrafts, and other personal loans. Balance transfers, however, are mostly focused on managing credit card debt.

Another difference is debt consolidation loans are instalment-based which means repayments are set over a predetermined amount of time. With a balance transfer, you can continue to repay and reborrow funds which might be a preferred option provided you manage your account responsibly and only borrow what you can afford to repay.

Before checking your eligibility for either option, it’s wise to review your credit history, total amount of debt, and whether you have the financial discipline to make repayments on time. If you’re unsure which option is right for you, it’s a smart move to seek professional debt advice

Compare the differences between balance transfers and debt consolidation loans

To help you decide whether a balance transfer or debt consolidation loan is right for you, here’s a breakdown of all their key factors.

Interest rates

Although a balance transfer often has a 0% or low-interest introductory offer, it typically reverts to a variable rate once the promotional period ends – often around 25% APR or more.

With a debt consolidation loan, the interest rate will typically range between 6% to 16% depending on the lender, requested loan amount, and your financial circumstances.

Fees

Balance transfer fees usually range from 2% to 5% of the total transfer amount. You should also consider the minimum and maximum amount you can transfer from one lender to another.

For debt consolidation loans, the lender may charge a loan origination fee to cover the costs of setting up your loan. If you pay back what you borrow ahead of schedule, you could also pay an early repayment charge (ERC).

Repayment structure

With a balance transfer credit card, your lender doesn’t impose a set repayment structure. However, to take advantage of lower interest rates, you should aim to clear your balance within the promotional period.

For a debt consolidation loan, you agree to set monthly repayments over a predetermined amount of time. Once repayments have been made, the loan comes to an end.

Impact on credit score

With both options, your lender will need to perform a hard search which could affect your credit score for a short time. Provided you’re accepted, both options may help to build your credit score provided you continue to make repayments on time and manage your account responsibly.

Can you use a balance transfer for debt consolidation?

Balance transfers can consolidate debt from multiple credit cards, which may help you manage money worries more effectively.

Benefits of a balance transfer also include an introductory 0% or low-interest period which can help you to pay off what you owe at a more manageable rate.

But before you check your eligibility for a balance transfer, you should be mindful that introductory rates are temporary. Once they expire, you could be faced with a higher APR, making it more challenging to get out of debt.

For that reason, you should only consider a balance transfer if you can pay off your existing debt during the 0% or low-interest period. Missing a payment could also end the promotional rate and impact your credit score.

You should also factor in balance transfer fees which usually range from 2% to 5%, as well as the minimum and maximum transfer amount – especially if you have substantial debt.

With an Aqua Balance Transfer credit card, the minimum you can transfer is £100, and you can transfer up to 90% of your available credit limit (including the balance transfer fee).

When should you choose a balance transfer or a debt consolidation loan?

Before committing to a balance transfer or debt consolidation loan, you should compare available offers and consider your financial circumstances to make the right decision.

Balance transfer may be better if:

• You already have good credit to help you potentially secure more desirable interest rates and credit limits with your chosen lender.
• You can repay during the 0% or low-interest period to take advantage of more manageable rates and regain control of your finances.
• Your debt is mostly credit-card-based which means it can be consolidated into one monthly payment (provided you have a sufficient credit limit with your new lender).

Debt consolidation loans may be better if:

• You need longer to repay your debt and you’re uncertain whether you can clear your balance during a low-interest promotional period.
• You prefer predictable payments and would benefit from a specific monthly payment amount and payment date.
• Your debts include loans, overdrafts, or multiple cards and can’t be consolidated into a single monthly payment using a balance transfer credit card.

If you’re confident in how balance transfers work and feel it’s the right option for you, the next step is to do your research and make a shortlist of preferred lenders.

With Aqua, you can apply for a balance transfer credit card by taking our free eligibility check that’s over in as little as 60 seconds – with no impact on your credit score.

Representative 34.9% APR (variable) for Aqua Classic

Alternatives to balance transfers and debt consolidation loans

If a balance transfer or debt consolidation loan isn’t right for you, there are other options available to help you, such as debt management plans (DMPs), budgeting tools, debt snowball strategies, or speaking to a debt advice charity such as StepChange.

Not only can they help you get free from debt, but you’ll also get advice on how to budget effectively, build debt management plans, and keep your credit score healthy.

With whatever strategy you choose, it needs to align with your current financial situation and what you want to achieve in your financial future. Taking the time to slow down and make the right decision can make a big difference later down the line.

A balance transfer and debt consolidation loan are both common strategies for paying off debt, potentially lowering interest rates, and helping you take control of your finances.

With either option you should always check the fees, repayment terms, interest rates, and any other conditions that could impact your financial situation.

If you feel a balance transfer is right for you, take our free eligibility check that’s over in as little as 60 seconds – with no impact on your credit score.

Representative 34.9% APR (variable) for Aqua Classic

This article is for general information purposes only and does not constitute financial advice. Individual circumstances vary, and you should seek independent, professional advice before making any financial decisions. Always consider your personal situation and consult an independent / qualified adviser if you're unsure about the best option for you.

Contributors

Hayley Bevan

Hayley is an editor at Aqua.

Victoria Smith

Victoria is an editor at Aqua.