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, but it's not the right call for everyone. If you can qualify for a rate that's significantly lower than what your cards charge, consolidating into one fixed monthly payment could save you real money and simplify your financial life.
That said, this is a complex topic and the details matter, so here's a full breakdown.
MoneyLion helps you find personal loan offers based on your background and info you provide. You can get matched with offers for up to $50,000 from top providers. You can compare rates, terms and fees from different lenders and choose the best offer for you.
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 runs about 11.86%, well below typical card APRs. With cards averaging 20% to 22%, 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
When Does It Make Sense To Use a Personal Loan for Credit Card Debt?
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
If you're still unsure, compare the common scenarios below to see when a personal loan is most likely to help.
Situation | Personal Loan a Good Fit? |
|---|---|
$8,000 across three cards at 22% to 25% APR and a credit score of 680 or higher | Yes — you'll likely qualify for a lower rate and simplify payments |
$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 It's Not the Right Move
Skip the personal loan if you:
Can't qualify for a rate meaningfully lower than your credit card APRs
Haven't addressed the spending habits that created the debt
Would be tempted to run your cards back up after paying them off
Only have a small balance you can pay off within a few months
Would face origination fees that eat into your interest savings
The biggest trap is ultimately treating debt consolidation as a fresh start and then racking up new charges. If you pay off $10,000 with a personal loan but charge another $5,000 over the next year, you're worse off than where you started.
How Much Could You Save?
The math of how much you could save using a personal loan to pay off your credit card debt comes down to the rate gap. The average personal loan rate from commercial banks currently sits around 11.86%, while average credit card rates hover between 20% and 22%.
Here's what that looks 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 | $895 |
$10,000 | 22% | $3,748.56 | 12% | $1,957.15 | $1,800 |
$15,000 | 24% | $6,185.74 | 12% | $2,935.73 | $3,250 |
$20,000 | 24% | $8,247.65 | 10% | $3,232.37 | $5,000 |
Keep in mind that the rate you actually get depends on your credit score, income and the lender you choose. Borrowers with strong credit can often do better than average.
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 |
|---|---|---|
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 score of at least 670 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: This is the hardest and most important step. Consider removing your cards from digital wallets until you've built better spending habits.
How Consolidation Affects Your Credit Score
Here's how consolidation can affect your score:
Credit utilization drops: Paying off card balances lowers your utilization ratio, which is one of the biggest factors in your score. This can give your score a noticeable boost quickly.
Hard inquiry causes a small dip: Applying triggers a hard credit pull, which may lower your score by a few points for up to a year.
Credit mix improves: Adding an installment loan alongside revolving credit can positively impact your score.
Payment history matters most: On-time payments on your new loan will help you build a strong track record. Missing payments does the opposite.
Keep old accounts open: Don't close your cards after paying them off. The available credit and longer history both help your score.
Next Steps
Check your credit score for free through your bank or AnnualCreditReport.com.
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.
Build a monthly budget that accounts for your loan payment and keeps you off credit cards.
If a personal loan doesn't fit, explore balance transfer cards or the debt avalanche method.
Personal Loans and Credit Card Debt FAQs
Still considering whether a personal loan is the right way to tackle your card balances? Here are answers to the questions people ask most before they apply.
Should I use a personal loan to pay off credit card debt?
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 can 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.
Does using a personal loan to pay off credit cards hurt my credit score?
Using a personal loan to pay off credit cards can actually help your credit score, depending on your situation. Paying off card balances reduces your credit utilization ratio, which is a major scoring factor. You'll see a small temporary dip from the hard inquiry, but the long-term effect is usually positive, as long as you make loan payments on time.
What credit score do I need to get a personal loan for debt consolidation?
Most lenders look for a score of at least 580 to 670 to approve a personal loan. To qualify for rates that make consolidation worthwhile, you'll generally want 670 or higher. The best rates go to borrowers above 720.
What happens if I pay off my credit cards with a personal loan and run them back up?
If you pay off your credit cards with a personal loan and run them back up, that’s the worst-case scenario. You'd end up with both a loan payment and new card balances, which is more total debt than you started with.
To avoid this, create a budget, consider removing cards from digital wallets and treat consolidation as a chance to reset your spending habits, not just your balances.
Is a balance transfer or a personal loan better for paying off credit card debt?
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.
How long does it take to pay off credit card debt with a personal loan?
Most personal loans for debt consolidation have terms of two to five years. A shorter term means higher monthly payments but less total interest, while a longer term lowers your payment but costs more overall. Choose a term that balances affordability with getting debt-free as fast as you can.
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."
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?"
Ryan Peterson contributed to the reporting for this article.
You may like
Community Posts
Similar Posts
Disclosures
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, MoneyLion does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information. For more information about MoneyLion, please visit https://www.moneylion.com/terms-and-conditions/.
MoneyLion does not provide, own, control or guarantee third-party products or services accessible through its Marketplace (collectively, “Third-Party Products”). The Third-Party Products are owned, controlled or made available by third parties (the "Third-Party Providers"). Should you choose to purchase any Third-Party Products, the Third-Party Providers’ terms and privacy policies apply to your purchase, so you must agree to and understand those terms. The display on the MoneyLion website, app, or platform of any of a Third-Party Product or Third-Party Provider does not-in any way-imply, suggest, or constitute a recommendation by MoneyLion of that Third-Party Product or Third-Party Financial Provider. MoneyLion may receive compensation from third parties for referring you to the third party, their products or to their website.