Should You Use a Personal Loan To Pay Off Credit Cards?
You should use a personal loan to pay off credit cards if you qualify for a significantly lower interest rate, can afford the monthly payment and have addressed your spending habits. Consolidating your balances into one fixed monthly payment could save you money and simplify your finances, but it isn't the right call for everyone.
Here's what to consider before deciding.
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Key Takeaways
Whether you should use a personal loan to pay off credit cards comes down to the rate gap. If your loan rate beats your card annual percentage rates (APRs), you could save on interest and simplify payments.
The average personal loan rate for 24-month loans runs about 11.90%, well below typical card APRs. With cards averaging 22.36%, consolidating can meaningfully cut the interest you pay.
Consolidation only works if you stop charging up your cards again. Paying off $10,000 but adding $5,000 in new charges leaves you worse off than before.
Weigh origination fees and longer repayment terms before you commit. A longer loan lowers your monthly payment but can cost more interest overall, so run the numbers first.
Summary generated by AI, verified by MoneyLion editors
Is a Personal Loan Right for You?
Personal loans often have lower interest rates than credit cards. They also lock you into a set monthly payment. These are both advantages when you’re trying to get out from under high interest rates and gain stability in your financial life.
You may want to consider using a personal loan to repay credit card debt if you:
Carry balances on multiple cards with high interest rates
Have a credit score strong enough to qualify for a lower rate than your cards charge
Want to replace several due dates with one predictable monthly payment
Have the discipline to stop adding new charges to your cards after paying them off
Still unsure? Here's when using a personal loan to pay off debt may or may not make sense.
Situation | Would a Personal Loan Be a Good Fit? |
|---|---|
$8,000 across three cards at 22% to 25% APR and a credit score of 680 or higher | Potentially — if you qualify for a lower APR and the fees don't outweigh the savings |
$2,000 on one card, planning to pay it off in three months | Probably not — the savings won't outweigh the hassle |
Carrying balances but still actively spending on cards | Risky — you could end up with both a loan payment and new card debt |
High balances but a credit score under 630 | Maybe not — you might not qualify for a rate low enough to make it worthwhile |
When Consolidation Backfires
Debt consolidation targets how your debt is structured, but doesn’t necessarily solve the underlying problem. If you don't address your spending habits that contributed to the debt, you could end up accumulating new balances while repaying your consolidation loan.
When Consolidation May Not Work
You’re still using the card that you’re trying to pay off: Continuing to use your credit cards after consolidation can lead to more debt. Consider removing your card from digital wallets to avoid unnecessary spending and keep your balances at $0.
Your monthly payment is too high: If your personal loan doesn't comfortably fit into your budget, you may struggle to keep up with repayment.
Your spending habits haven't changed: Take a closer look at where your money is going and what changes you can make to avoid accumulating more debt.
The same caution applies to new big-ticket buys like furniture, appliances or a laptop. If you're considering financing, make sure the payment fits your budget and won't restart the debt cycle.
How Much Could You Save?
The amount you could save using a personal loan to pay off your credit card debt largely depends on the difference in interest rates. According to Federal Reserve data:
The average interest rate on 24-month personal loans from commercial banks is 11.90%.
The average interest rate on credit card accounts is 22.36%.
Here's what potential interest savings could look like over a three-year repayment timeline:
Debt Amount | Credit Card APR | Interest paid | Personal Loan APR | Interest paid | Estimated Interest Saved |
|---|---|---|---|---|---|
$5,000 | 22% | $1,874.28 | 12% | $978.58 | $896 |
$10,000 | 22% | $3,748.56 | 12% | $1,957.15 | $1,791 |
$15,000 | 24% | $6,185.74 | 12% | $2,935.73 | $3,250 |
$20,000 | 24% | $8,247.65 | 10% | $3,232.37 | $5,015 |
Note: Examples assume fixed APRs, equal monthly payments over 36 months and no additional charges or fees. Actual savings will vary.
Keep in mind that the rate you actually get depends on your credit score, income and the lender you choose. Borrowers with strong credit may qualify for lower rates, but origination fees and other loan costs can reduce your savings.
Pro Tip
The wider the gap between your credit card APR and your personal loan APR, the more you could save on interest. If the difference is small, compare the total borrowing costs, including fees, before deciding if consolidation is worth it.
Pros and Cons at a Glance
Using a personal loan to pay off credit card debt has both pros and cons. These are the big ones to keep in mind:
Pros | Cons |
|---|---|
Lower interest rate means more of your payment goes toward principal | Origination fees — sometimes 1% to 8% of the loan — can offset savings |
One fixed monthly payment replaces multiple due dates | You need good enough credit to qualify for a competitive rate |
Set repayment schedule gives you a clear debt-free date | A longer loan term could mean paying more interest overall |
Paying off cards can lower your credit utilization ratio | Doesn't fix the spending habits that created the debt |
No more juggling minimum payments across multiple accounts | Your paid-off cards become a temptation to spend again |
Alternatives to a Personal Loan
Depending on your situation, one of these alternatives might be a better fit.
Option | Best For | Watch Out For |
|---|---|---|
Balance transfer credit card | People with good credit who can pay off debt within 12 to 21 months | Transfer fees of 3% to 5% and high APRs after the intro period ends |
Debt avalanche method | DIY types willing to aggressively target high-interest balances first | Requires discipline and doesn't lower your interest rates |
Debt snowball method | People who need quick wins to stay motivated | You'll pay more in interest than the avalanche method |
Credit counseling or debt management plan (DMP) | Those who feel overwhelmed and need professional guidance | May require closing credit card accounts |
Negotiating with your card issuer | Anyone — it's free to ask for a lower rate | Not guaranteed, and the reduction may be modest |
How To Pay Off Credit Card Debt With a Personal Loan
If you decide you do want to get rid of credit card balances using a personal loan, here’s what you need to do:
Add up your total credit card debt: Check every card balance and note each interest rate so you know what you're working with.
Check your credit score: You'll generally want a higher score to land a rate that makes consolidation worthwhile.
Prequalify with multiple lenders: Most let you check rates with a soft credit pull that won't affect your score. Compare banks, credit unions and online lenders.
Crunch the numbers: Compare the total cost of the personal loan — including origination fees — against what you'd pay by continuing to pay down your cards directly.
Apply and use the funds to pay off your cards: Once approved, use the loan proceeds to pay off your card balances in full. Some lenders will send payments directly to your card issuers.
Set up autopay on your new loan: Many lenders offer a rate discount for automatic payments, and you'll never miss a due date.
Resist the urge to use your cards again: Make sure you keep your card out of reach by removing them from digital wallets. It’s important to resist the urge to rack up more debt as you move through the process.
Credit Score Impact
Here's how debt consolidation can affect your credit score:
Credit utilization drops: Paying off card balances lowers your utilization ratio, which is a major factor in your credit score. This may help improve your score, especially if you keep your balances low.
Hard inquiry causes a small dip: Applying for a personal loan typically triggers a hard credit check, which can hurt your credit score and lower it by a few points. The impact on your FICO score generally lasts for up to a year.
Credit mix may improve: Adding an installment loan alongside revolving credit can positively impact your score.
Payment history matters most: Making on-time payments on your new loan can help you build a strong track record. Paying off a loan can affect your credit in other ways, too, especially if it changes your credit mix or account age.
Keep old accounts open: Don't close your cards after paying them off. The available credit and longer history both help your score.
Your Next Steps
Check your credit score for free through your bank or credit card portal.
Use a debt consolidation calculator to compare your current interest costs against a personal loan.
Prequalify with two or three lenders to see what rates you're offered — they’ll only use a soft inquiry, so this won't hurt your credit but it will give you options.
Once your consolidation loan is in place, come up with a monthly budget and plan for paying off personal loans faster so you cut interest without wrecking your budget.
If a personal loan doesn't fit, explore balance transfer cards or the debt avalanche method.
FAQs
Should I use a personal loan to pay off credit cards?
If you can qualify for a personal loan with a lower rate than your credit cards — and you're committed to not running balances back up — it could save you money and simplify your payments. If you can't get a competitive rate or your debt is small enough to pay off quickly, it may not be worth it.
What if I can't qualify for a lower rate?
If you can’t qualify for a lower rate with a personal loan, try to see if you can negotiate with your credit card lenders for a reduced APR. You can also speak to a nonprofit credit counselor and enroll in a DMP.
Will consolidation hurt my credit score?
When you apply for consolidation, your credit score may take a dip. However, on-time payments on a consistent basis can also improve your score in the long term.
What happens if I charge up my cards again after paying them off?
You’ll be handling two debts. You’ll be responsible for your personal loan payments and your new credit card balances.
How do I know if I'm ready for consolidation?
You’ve addressed the underlying issue with your spending habits, you can afford the monthly payment and you’re able to get a lower interest rate.
Is a balance transfer card better than a personal loan?
Balance transfer cards often offer 0% intro APR for 12 to 21 months, which is hard to beat if you can pay off the balance in that window. Personal loans are better for larger balances or when you need more time, since they offer fixed rates and a set schedule. Just be sure to factor in transfer fees when comparing.
Key Terms
Debt consolidation: Combining multiple debts into a single loan or payment, ideally at a lower interest rate. Using a personal loan to pay off cards is one common form.
APR: The yearly cost of a loan including interest plus mandatory fees, which makes it the best figure for comparing offers.
Credit utilization ratio: The share of your available revolving credit you're using. Paying down cards lowers it and can help your score.
Origination fee: A one-time upfront charge some lenders deduct from your loan proceeds, adding to the total cost of borrowing.
Balance transfer card: A card that lets you move existing balances, often at a 0% intro APR that later rises, plus a balance transfer fee.
Debt avalanche method: A payoff strategy that targets your highest-interest balance first while paying minimums on the rest, minimizing total interest over time.
Hard inquiry: A lender's credit check when you formally apply, which can lower your score by a few points temporarily.
Summary generated by AI, verified by MoneyLion editors
Sources
Federal Reserve Bank of St. Louis. 2026. "Finance Rate on Personal Loans at Commercial Banks, 24 Month Loan."
Consumer Financial Protection Bureau. 2023. "What do I need to know about consolidating my credit card debt?"
Consumer Financial Protection Bureau. 2024. "What is a prepayment penalty?"
Federal Reserve. 2026. "Consumer Credit - G.19."
Ryan Peterson and Ana Gotter contributed to the reporting for this article.
Data is accurate as of Oct. 12, 2026, and is subject to change.
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