Should You Use a Personal Loan To Pay Off Credit Cards?

Credit card debt can be a slippery slope. When high interest rates make it harder to make meaningful progress, a personal loan may provide an opportunity to consolidate debt and create a payoff plan.

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Key Takeaways

• One payment replaces many. Consolidating several card balances into a single loan means one due date and one fixed payment to track.

• You get a real payoff date. Personal loans have fixed terms, typically 1 to 7 years, unlike revolving card debt that can linger for years.

• It can help your credit utilization. Paying off cards with a loan can lower your utilization ratio — ideally below

  30% — which may support your score.

Summary generated by AI, verified by MoneyLion editors

How a Personal Loan Can Help You Pay Off Your Credit Cards

A personal loan can help pay off credit cards by consolidating multiple balances into a single loan. Here’s how it can help.

Lower Interest Rates

Personal loans typically offer lower interest rates than credit cards. Data from the Federal Reserve from February 2026 shows that credit cards have an average rate of 21%, while the average rate for a 24-month personal loan is 11.40%.

A lower interest rate means you pay less in interest over time, and it could also mean a lower minimum monthly payment. So if you qualify for a personal loan with a lower APR, more of each monthly payment goes toward reducing the principal balance rather than interest. This makes it easier to save money and quickly pay down debt.

Simplify Multiple Payments

Managing multiple credit card payments can be difficult, especially when each card has a different due date and minimum payment. If you miss a payment, it could lead to late fees, penalty interest rates or damage to your credit score.

A personal loan allows you to consolidate multiple balances into a single monthly payment. This reduces the number of bills you need to manage. Having a single due date and payment amount to track makes it easier to stay organized and monitor your debt repayment plan.

Create a Fixed Repayment Timeline

Credit cards are revolving accounts, meaning there’s no set payoff date as long as you continue carrying a balance. If you only make the minimum monthly payment, it could take years to eliminate your debt and cost much more in interest.

Personal loans have a fixed repayment term, typically ranging from one to seven years. Knowing when your debt will be paid off can make it easier to stay motivated throughout the repayment process.

Could Improve Your Credit Score

A personal loan could potentially improve your credit score by lowering your credit utilization ratio. Credit utilization measures how much of your available revolving credit you’re using. Most experts recommend keeping your credit utilization ratio below 30%.

For example, if your credit cards are carrying balances close to their credit limits, paying them off with a personal loan could reduce your credit utilization rate. Lower utilization generally shows lenders that you’re managing credit responsibly, which may have a positive impact on your score.

Make Budgeting Easier

Credit card payments can fluctuate from month to month depending on your balance, interest charges and new purchases. This can make it difficult to predict how much you’ll owe. Personal loans typically have fixed monthly payments that remain the same throughout the repayment term. If you know how much you pay each month, it may be easier to budget your household expenses.

What You Should Know Before Getting a Personal Loan for Debt

While there are benefits to taking out a personal loan to pay off credit card debt, there are also drawbacks.

There’s No Guarantee You’ll Receive Better Terms

You may not qualify for the amount necessary to pay off your credit card debt. There’s also a chance that you may not qualify for a lower APR.

Lenders determine loan approval, interest rates and borrowing limits based on factors such as your credit score, income, employment history and debt-to-income (DTI) ratio. While lenders may advertise lower rates, these are usually reserved for borrowers with excellent credit. If you’re approved, but with a higher-than-expected interest rate, the savings may be minimal or nonexistent.

Fees Can Increase the Cost of Borrowing

You may be able to save on interest with a personal loan, but there are fees that come with it. Some lenders charge origination fees, which are often deducted from the loan proceeds and can range from 1% to 10% of the total loan amount. So if you take out a personal loan to pay off $15,000 of credit card debt, the upfront fee could be between $150 and $1,500.

Some lenders offer low-fee or no-fee loans if you have good credit, so shopping around could save you money. Even if a loan has a lower interest rate than your credit cards, fees can reduce the overall savings.

You Could Accumulate More Debt

A personal loan can pay off your existing credit card balances, but it doesn’t eliminate the reasons the debt accumulated in the first place. 

In some cases, debt builds because of overspending. In others, it may come from unexpected expenses, rising living costs, income loss or not earning enough to keep up with bills. If you continue to use your credit card after consolidating your balances, you could end up with both personal loan debt and new credit card debt.

Is a Personal Loan the Right Choice for You?

For many borrowers, a personal loan can be a great debt repayment tool. For others, it may not be the best fit.

A personal loan may be worth considering if:

• You qualify for a lower interest rate than your current credit cards.

• You have multiple credit card balances and want to simplify your repayment plan.

• You want a structured repayment plan with a fixed payoff date.

• You can comfortably afford the monthly loan payment. 

• You have a stable source of income.

• The loan amount is large enough to cover most or all of your credit card debt.

• The loan’s fees don’t outweigh the potential savings.

• You have a plan to avoid accumulating additional debt after paying off your credit cards.

A personal loan may not be the best option if:

• You don’t qualify for a lower APR.

• The monthly payment would strain your budget.

• You expect to rely on credit cards to cover ongoing expenses.

• The loan fees significantly reduce your savings.

• You’re considering borrowing more than you need to pay off existing debt.

Alternatives To Personal Loans

If a personal loan doesn’t feel like the right fit, there are other ways to tackle credit card debt. The best option depends on factors such as your credit score, debt amount and monthly budget.

• Balance transfer credit card: Some credit cards offer introduction 0% APR balance transfer promotion. This allows you to move existing credit card debt and pay it off without accruing interest for a limited period. Balance transfer fees may apply, and the regular APR typically begins once the promotional period ends.

• Debt management plan: Nonprofit credit counseling agencies may offer a debt management plan that combines multiple unsecured debts into a single monthly payment. The agencies can also reach out to creditors to request an interest rate deduction.

• Debt snowball or avalanche method: These are debt repayment strategies that focus on paying off debt without taking out a new loan. The debt snowball method focuses on paying off the smallest balances first, while the debt avalanche method targets debts with the highest interest rates.

FAQs

Is it good to pay your credit card with a personal loan?

Paying off your credit card with a personal loan could potentially improve your credit utilization and reduce the interest you pay on your credit card debt. However, the debt doesn’t go away. You still need to make payments on the loan and fix what put you into debt in the first place.

How much would a $10,000 personal loan cost a month?

How much a $10,000 personal loan costs per month depends on the interest rate and loan term. For instance, if you have an interest rate of 11.40% on a 24-month loan, your monthly payment would be $467.94, not including fees. If you have a 15% interest rate on a five-year loan, then you’d pay $237.90 per month.

Is it better to use a loan to pay off credit cards?

It may be better to use a loan to pay off credit card debt if you qualify for a lower interest rate and won’t accumulate new debt. A personal loan can help reduce interest costs, simplify repayment and provide a timeline for becoming debt-free. Make sure to compare the total cost of borrowing before taking out a loan.

How much would a $5,000 personal loan cost per month?

How much a $5,000 personal loan costs per month depends on the interest rate and loan term. If you have an interest rate of 13% on a 24-month loan, your monthly payment would be $237.71, not including fees. If you have a 17% interest rate on a five-year loan, then you’d pay $124.26 per month.

What is the 7-year rule on credit cards?

Under the seven-year rule on credit cards, negative credit card information can remain on your credit report for a maximum of seven years. This includes late payments or accounts sent to collections. After, credit bureaus must remove this information from your credit report.

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Key Terms

• Personal loan: A lump-sum installment loan you repay in fixed monthly payments over a set term, often used to consolidate higher-rate debt.

• Debt consolidation: Using one new loan or product to combine multiple debts into a single payment, ideally at a lower overall rate.

• Credit utilization ratio: The share of your available revolving credit you're using; keeping it below 30% generally helps your score.

• Origination fee: A one-time upfront charge, typically 1% to 10% of the loan, usually deducted from your proceeds before you get the funds.

• APR (annual percentage rate): The yearly cost of borrowing including interest and certain fees — the best figure for comparing loan offers.

• Fixed interest rate: A rate that stays the same for the life of the loan, keeping your monthly payment consistent.

• Debt-to-income ratio (DTI): The share of your gross monthly income going to debt payments, which lenders weigh when setting rates and limits.

• Seven-year rule: Under the Fair Credit Reporting Act, most negative information can stay on your credit report for up to seven years.

Sources

• Federal Reserve (FRED) — Finance Rate on 24-Month Personal Loans

• Federal Reserve (FRED) — Credit Card Interest Rate, All Accounts

• CFPB — How long does information stay on my credit report?

• myFICO — What's in my FICO Scores?

Summary generated by AI, verified by MoneyLion editors