Should I Pay Off My Credit Card With a Personal Loan?

Photo to accompany story about using a personal loan to pay off debt. Getty Images
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Balancing debt across multiple credit cards can feel like a full-time job. If you’re dealing with different payment dates, multiple balances, and varying interest rates every month, you may be interested in consolidating that credit card debt with a personal loan.

Consolidating debt with a personal loan means that you’ll be paying off one balance through one fixed monthly payment for a fixed period of time. Here’s what you should know about using a personal loan for debt consolidation — and the alternatives available if you don’t qualify.

When You Should Consider Taking Out a Personal Loan

If you’re looking for options to consolidate your credit card debt, here are a few instances when a personal loan might be right for you.

If the Interest Rate Would Be Lower

Ultimately, the main reason that would make consolidating all of your credit card balances with a personal loan worth considering is if you’re able to secure a lower interest rate. This would make your monthly payments lower than what you’re currently paying across multiple cards and interest rates. 

You can use our loan calculator to determine how much you can save with a personal loan.

If Managing Too Many Credit Cards Is Unwieldy

Carrying balances across several credit cards can be stressful — and sometimes, payments slip through the cracks. Another downside of having several credit cards with balances is figuring out which card to prioritize paying off and how much to allocate to each one per month. “A personal loan is a great option to simplify the payments and potentially get a lower rate, and also to know when you’ll pay off the debt,” says Trina Patel, financial advice manager at Albert, an automated money management and investing app. “You’re getting a loan at a fixed term, so you’ll know if you have five years to pay and how much your monthly payment is.”

If You Have a Budget and Plan In Place

When transferring debt to a personal loan, make sure you don’t fall into bad habits. “If I have $50,000 in credit card debt and I consolidate that into a personal loan without making a plan for myself, what I have essentially done is take out $50,000 to spend again. Make sure you’re replacing it with something you can take care of, instead of taking out additional debt,” says Tara Alderete, director of enterprise learning at Money Management International, a nonprofit financial counseling and education agency.

Pro Tip

Contact your credit card company if you’re struggling financially and can’t keep up with payments. The company may be able to lower your interest rate or temporarily waive payments or fees.

You can mitigate this by creating a budget that allows you to consistently make your monthly payments. An emergency fund also helps in this regard. “If something happens, you have that money to fall back on and you’re not robbing Peter to pay Paul,” Alderete says.

If You’ve Considered the Fees

Don’t get blindsided by any mystery fees. They should factor into your decision on whether it’s worth taking out a personal loan, which often come with origination fees. These are one-time costs you pay upon loan approval. These fees typically range from 1% to 10%. If you are consolidating $15,000 in credit card debt, then you could be hit with a surprise origination fee as high as $1,500 if you’re not vigilant when reading the contract. Some lenders eschew origination fees, but they usually end up factoring that cost into your monthly payments, which makes your APR higher. Always read the fine print and do the math before taking on new debt.

Alternatives to Personal Loans

Not everyone will be able to qualify for a personal loan — and even if you do qualify, your interest rate may not be meaningfully lower than that of your credit cards for the transition to be worth it. Lenders may be skeptical of first-time borrowers, people with bad, limited, or no credit history, or those who are unemployed. If you match any of these scenarios and don’t find what you want in a personal loan, here are a couple other options for consolidating credit card debt.

Balance Transfer Credit Cards

Many credit cards offer an introductory 0% APR on balance transfers, which can last anywhere from 12 to 15 months. This means that during this intro period, you won’t be on the hook for paying interest — provided you’re making at least the minimum payments on time each month. A balance transfer credit card may be ideal for those who have a more manageable debt load and want to consolidate onto one credit card, which means one payment per month. Patel recommends this option for people who have $5,000 or less in credit card debt.

Just keep in mind a few things: there’s usually a balance transfer fee (3% to 5% of the balance) involved when transferring balances between credit cards. These introductory offers are also typically only available to people who have good credit. Lastly, people should make sure to pay off the entire credit card balance before the introductory balance transfer offer ends, otherwise they may be stuck with a high variable APR and could land themselves in their previous predicament.


A home equity line of credit (HELOC) may be a viable debt-consolidation option if you own a home. Unlike a personal loan, a HELOC is a revolving credit line where you can borrow as little or as much as you want — it’s essentially like a large credit card limit that’s contingent on the equity of your home. Interest rates for HELOCs tend to be lower than what you’d find with a credit card, but the risk is that your home is the collateral. So if you fall behind on your payments and go into default, you risk losing your house or condo. If you decide to go with a HELOC, it’s important to have a plan in place for how you’ll pay off debt in a timely manner. Otherwise, your lender may come knocking at your door (figuratively).