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

Using a personal loan to pay off your credit card debt can be a smart move if you’re drowning in high-interest rates and struggling to keep up with multiple payments.

It allows you to consolidate your credit card debt into a manageable monthly payment, often at a lower interest rate. This can simplify your financial life and save you money on interest over time.

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Key Takeaways

• Using a personal loan to pay off credit card debt can lower your interest costs and simplify repayment. The average personal loan rate is around 11.40%, significantly less than the 20% or higher rates common on credit cards, meaning more of your payment goes toward the principal balance.

• Consolidating multiple credit card balances into one personal loan replaces several due dates with a single fixed monthly payment. This can reduce the risk of missed payments and make budgeting more straightforward.

• A personal loan is not the right move for everyone. Origination fees, prepayment penalties and higher rates for borrowers with lower credit scores can offset the potential savings, so it is important to compare the full cost before committing.

• Keeping paid-off credit card accounts open and avoiding new debt are key steps to protecting your credit after consolidation. Paying off balances lowers your credit utilization ratio, which can improve your credit score over time.

Summary generated by AI, verified by MoneyLion editors

Pros of Using a Personal Loan To Pay Off Credit Card Debt

Consolidating your debt with a personal loan can come with several benefits:

Lower Interest Rate

As of May 2026, the average personal loan interest rate is around 11.40%. Credit card interest rates can start around 20% and go even higher.

If you get a personal loan, more of your payment goes toward the principal balance rather than interest, helping you pay off your debt faster and with less total interest paid.

One Payment For All of Your Debts

By using a personal loan, you can pay off all your credit card balances at once. This gives you a clean slate and removes the stress of juggling multiple payments and due dates.

Fixed Repayment Schedule

Personal loans come with a fixed repayment schedule, so you’ll know exactly when your debt will be paid off. This can provide a sense of stability and make budgeting easier.

Simplified Debt Management

Instead of dealing with multiple credit card payments, you’ll have just one monthly payment to manage. This simplification can reduce the chances of missing a payment and incurring late fees.

Potential Credit Score Improvement

Paying off credit cards with a personal loan can lower your credit utilization ratio, which might boost your credit score. Plus, diversifying your credit mix can also positively impact your score. 

Cons of Using a Personal Loan To Pay Off Credit Card Debt

Personal loans aren’t a magic bullet. There are some potential drawbacks to consider.

Possible Fees and Charges

Personal loans can come with origination fees, late payment fees and prepayment penalties. These costs can add up and eat into the financial benefits of consolidating your debt.

Longer Repayment Term

While a longer repayment term means lower monthly payments, it also means you’ll be in debt for a longer period and may pay more interest overall.

Low Interest Rates Are Not Guaranteed

Not everyone qualifies for the lowest interest rates on personal loans. Your credit score and financial history will significantly affect the rate you’re offered.

Alternatives To Using a Personal Loan To Pay Off Credit Card Debt

A personal loan isn’t your only option. Here are some alternatives:

• Negotiate a lower interest rate: Contact your credit card issuers and ask for a lower interest rate. They might agree to reduce your rate if you have a good payment history.

• Inquire about hardship programs: Some credit card companies offer hardship programs for customers facing financial difficulties. These programs may reduce your interest rate or waive fees.

• Get a balance transfer credit card: A balance transfer credit card allows you to move your high-interest debt to a card with a lower interest rate, often with an introductory 0% annual percentage rate (APR) period.

• Use the debt snowball or avalanche method: With the debt snowball method, you pay off your smallest debts first. The avalanche method focuses on paying off the highest interest rate debts first. Both strategies can help you eliminate debt efficiently.

• Consider credit counseling: Credit counseling agencies can help you create a debt management plan and negotiate with creditors on your behalf.

How To Consolidate Credit Card Debt While Safeguarding Your Credit 

Consolidating credit card debt won’t necessarily hurt your credit score. In fact, it can improve your score if done correctly. Here’s how:

• Keep old accounts open: Even after paying off your credit cards, keep the accounts open to maintain a low credit utilization ratio.

• Make timely payments: Ensure you make on-time payments on your new personal loan to build a positive payment history.

• Avoid New Debt: Resist the urge to accumulate new debt while paying off your loan.

Take Control of Your Credit Card Debt

Using a personal loan to pay off credit cards can be a strategic move to simplify debt management and potentially save on interest. It’s essential to weigh the pros and cons and consider alternatives before deciding. By understanding your options and creating a solid repayment plan, you can take control of your finances and work toward a debt-free future.

FAQs 

Can you get a loan to pay off credit card debt?

Yes, you can get a personal loan to pay off credit card debt. This can help you consolidate your debts into one monthly payment with a potentially lower interest rate.

Is it smart to take out a loan to pay off credit card debt?

It can be smart if you secure a lower interest rate and commit to not accruing more credit card debt. This strategy can simplify payments and reduce the overall interest you pay.

How to pay off a $10,000 credit card debt?

To pay off a $10,000 credit card debt, consider options like a personal loan, balance transfer card, or debt management plan. Each method can help lower interest costs and simplify payments.

Key Terms

• Debt consolidation: The process of combining multiple debts into a single loan, ideally at a lower interest rate. Using a personal loan to pay off credit card balances is one of the most common forms of debt consolidation.

• Credit utilization ratio: The percentage of your available revolving credit that you are currently using. Paying off credit card balances with a personal loan can lower this ratio and potentially improve your credit score.

• Balance transfer credit card: A credit card that allows you to move existing high-interest debt onto a new card, often with a 0% APR introductory period. It is a common alternative to a personal loan for credit card debt consolidation.

• Debt avalanche method: A repayment strategy that directs extra payments toward the highest-interest debt first while maintaining minimum payments on others. It typically minimizes total interest paid over time.

• Origination fee: A one-time upfront charge some lenders deduct from your loan proceeds before funding. It adds to the overall cost of borrowing and should be factored into any debt consolidation calculation.

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."

• Liberty Street Economics. 2025. "Why Are Credit Card Rates So High?"

• 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?"