May 30, 2024

Should I Use a Personal Loan to Pay Off Credit Card Debt?

If you’re accruing interest faster than you can pay off your credit card balance, the debt can feel unmanageable. And you aren’t alone. Credit card debt rose by $228 billion between the second and third quarters of 2023, according to data from the Federal Reserve Bank of New York, while the average credit card interest rate remained over 22% as of Dec. 13, according to Bankrate. 

A personal loan, with an average interest rate of 11.54% in December 2023, stands as an enticing solution for many borrowers. But qualifying for a lower rate could be difficult, and applying for a personal loan may not be the best idea if you’re not prepared to commit to paying off your debt. Here’s what to consider before you apply.

When you should use a personal loan to consolidate credit card debt

If you have high credit card debt, a personal loan is an installment loan that may offer a lower interest rate and more reasonable monthly payments as your work to pay down your debt.

If you qualify for a lower interest rate, you’ll be able to put more money toward the loan principal, which may help you pay off your debt faster. A personal loan also provides fixed monthly payments and a timeline for repayment, which can help you manage your finances if you’re paying off multiple cards and making other payments like an auto loan or student loans. 

Pros and cons of taking out a personal loan to pay off credit card debt


  • Interest rates are typically lower than credit cards

  • One fixed monthly payment can make debt management easier

  • Diversifying your credit mix and lowering your credit usage ratio could improve your credit score in the long run


  • No guarantee that you’ll qualify for a lower rate

  • Risk of creating more debt if you add purchases to your credit card again and don’t pay them off 

  • Could hurt your credit score if you continue using your credit cards and raise your credit utilization ratio

  • Fees could cancel out any savings on interest charges

Questions to ask before using personal loans to pay off credit card debt

Before you apply for a personal loan, answer these questions to help you decide if it’s the best financial choice for you.

Do you qualify for a personal loan at a lower interest rate? 

The best personal loans offer interest rates substantially lower than credit card interest rates, which means you could save on interest, reduce monthly payments and pay off your debt faster. However, personal loan offers vary by applicant, and your eligibility and terms are typically based on your creditworthiness and income. 

If you don’t qualify for a lower rate than what you’re paying in credit card interest, you may need to work on improving your credit score first. You can start by reviewing your credit reports for errors that could be dragging your score down. Paying down as much existing debt as you can or asking your credit card companies for a credit line increase can reduce your credit utilization ratio and also help boost your credit score. 

Will a personal loan really save you money?

Personal loans typically come with fees, which you should factor in when deciding if the loan can save you money. Some charge origination fees from 1% to 5% of the total loan amount, which may be deducted from the loan amount. Other fees may include prepayment penalties and late payment fees, so be sure to read the fine print. 

Calculate the total amount you’d pay over the life of the personal loan plus the fees versus paying off your credit card debt (you can use this credit card payoff calculator). If a personal loan won’t save you money, you may want to consider another method for paying off credit card debt

Can you afford the new monthly payment for the life of the loan?

If you’re already making multiple credit card payments and can replace them with one lower personal loan payment, you might be in good shape. But if you can’t consistently pay your credit card bills on time and couldn’t manage the personal loan payment, you might consider other options such as a debt management plan or bankruptcy. 

You should also compare different loan repayment timelines. Terms for the best personal loans can range from two to 12 years. Make sure you can afford to make monthly payments for the duration of the personal loan to avoid defaulting, which could result in penalties and damage to your credit score.

Choosing a shorter loan term could help you pay off your debt in less time and at a lower interest rate. A longer repayment term may offer you more time and smaller monthly payments, but you’ll typically have to pay higher interest rates, which means you’ll pay more over time. And the lower monthly payments could lull you into thinking you can start spending again before the personal loan is paid off. 

Will getting a personal loan to pay off credit cards help you stay out of debt? 

If you’re struggling to afford essential expenses, personal loans might help consolidate your debt payment — but it may not fix your overall debt problem. If you use credit cards to get by, you might be tempted to continue using your credit cards. Before you apply for a personal loan, it’s important that you can commit to paying off the debt and to avoiding using credit cards in a way that lands you back in credit card debt. 

How quickly do you need the personal loan?

Some lenders disburse your personal loan funds in minutes or the next business day. Others can take weeks. Know the timelines so you can plan accordingly. Continue making your minimum credit card payments until you receive the loan funds and can pay off your credit card debt.  

Alternatives to using a personal loan for credit card debt repayment

Personal loans aren’t the only way to pay off credit card debt. Here are some other options:

  • Use a balance transfer card. If you can qualify for a 0% introductory APR card and pay off the balance by the time the period ends, you could avoid interest charges as you pay off your debt. Balance transfer cards typically charge a fee — usually 3% to 5% of the transferred amount — and the terms are typically shorter than personal loans — typically from nine to 21 months. If you have a substantial amount of debt to pay off, you may need to apply for multiple balance transfer cards.  
  • Negotiate a lower interest rate on your credit cards. Credit card companies may be open to negotiating a lower interest rate, especially if you have been a good customer and continue making on-time payments. You may also leverage negotiating power if you’ve received other low-interest credit card offers or are ready to transfer your debt to  0% interest card. 
  • Use other payoff strategies to wipe out your credit card debt. Review your financial situation to find ways to cut expenses, then put the money toward your credit card balances. You can use the snowball or avalanche method to help you make a plan to pay off credit card debt. Then look at your budget and find ways you can cut expenses, from eating out less often to reducing grocery bills by purchasing store brands. Are there ways to make additional money to put toward your debt, like selling items on OfferUp or Facebook marketplace? If you have time, consider a side hustle to bring in additional money.

Steps to pay off credit card debt with a personal loan

If you’ve determined that a personal loan is the right choice, take these steps to get started: 

  1. Research reputable lenders. Check out our list of the best personal loans for debt consolidation — you can connect with lenders with the click of a button. You may also want to start with your local bank or credit union, especially if you prefer to apply for a loan in person.
  2. Compare rates and fees. Once you’ve collected three to five lenders, compare the rates and fees for the personal loans. You might submit your details online for prequalification, which will give you a good idea of your interest rate and terms without a hard credit inquiry that would lower your credit score.
  3. Apply for the personal loan. Once you’ve pre-qualified, fill out an application and supply any required documentation for the loan. This step typically requires a hard credit check.
  4. Create a repayment plan. Once you have your loan amount and terms, factor the new payments into your budget. Remember, you don’t want to rely on the credit cards you are paying off, and you don’t want to miss a loan payment. If your personal loan won’t cover all your credit card debt, make sure to include remaining minimum credit card payments too. 

The bottom line

A personal loan can help you by consolidating your credit card balances into a single monthly payment and lowering your average interest rate to help you get out of debt faster. To qualify for the best rates, you’ll need excellent credit. But you can find personal loans even if you have a less-than-stellar credit score


The key to using a personal loan to pay off credit card debt is committing to paying down the debt without falling back into the habit of using your credit cards. If you don’t feel you can stop using your credit cards once you’ve paid them off, you could find yourself in a worse situation than before — with a monthly loan payment plus high-interest credit card debt. 


When you apply for a loan, the lender will run a hard credit check, which could cause your credit score to temporarily drop. Each time you open a new line of credit, your score may drop until you show you can handle the new monthly payments. If possible, apply for a loan where you can find out if you are pre-approved, which requires the lender to run a soft inquiry that won’t affect your credit score. 

The ding to your credit score could be offset with the potential positive impact of a personal loan. Opening a personal loan may diversify your credit mix, which can improve your credit score. Your “credit mix” counts toward 10% of your total score. Additionally, using your personal loan to pay off your credit cards can lower your credit utilization ratio quickly. Credit utilization counts for 30% of your credit score, so paying off credit card debt could have a significant impact, as long as you keep those credit lines open and empty.

The average interest rate for a personal loan is 11.54% as of December 2023, compared with the average credit card interest rate, which is over 22%. However, personal loan lenders typically determine the interest rates they offer based on a borrower’s creditworthiness and income, so there’s no guarantee your personal loan interest rate will be lower than your credit cards. And some balance transfer cards offer 0% introductory APR for a limited period, which could help you save money if you can pay off the credit card balance before the period ends.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

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