Why Borrowers With $10K in Debt Should Consider a Personal Loan Over a Credit Card

Debt can leave you feeling suffocated and defeated. Each month you’re making payments, but the balance never goes down. That’s because interest rates on many loan products have risen so high that most of your payment goes toward interest.

According to the Federal Reserve's Consumer Credit data, the average credit card interest rate was 20.94% in July 2026. There is some good news, though. The same report showed the average interest rate on a personal loan was 11.86%. While that isn’t cheap in absolute terms, it’s much lower than what most people pay their credit card company.

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With average interest rates on personal loans more than nine percentage points lower than credit cards, does it make sense to move your credit card debt to a personal loan? Let’s look at the numbers.

Personal Loan Rates vs. Credit Card Rates Right Now

Banks generally set interest rates for their products based on the risk they’re assuming. For example, someone with a higher credit score will have a lower interest rate than someone with a lower credit score because they’re a less risky borrower.

The same concept applies to different products, as well. Credit cards are a form of revolving debt. They allow you to borrow, pay down the balance and then borrow again. This cycle makes it impossible for lenders to know when you’ll pay your balance in full.

Personal loans are different. When you take out a personal loan, you’re assigned a monthly payment amount, and you make that payment until your loan is paid off. Because of this, personal loans are a less risky product for lenders. This is why you see a significant difference in the rates lenders offer. 

Here's the Math on a $10K Balance

Understanding the math is the best way to see how much you could save by transferring a credit card balance to a personal loan. Assuming you have $10,000 in debt, let’s compare the cost of a credit card versus a personal loan.

• Scenario A — $10,000 on a Credit Card: Assuming you have $10,000 in credit card debt at a 19.56% interest rate and want to pay it off in three years, you’ll need to make monthly payments of $369.40. Doing so will result in $3,298 in interest, and your $10,000 debt will cost a total of $13,298.

• Scenario B — $10,000 on a Personal Loan: Now, let’s assume you transfer that $10,000 in credit card debt to a 36-month personal loan at an interest rate of 12.21%. Your monthly payments would be $333.15, and your total interest paid would be $1,993.

By qualifying for a personal loan, you could potentially reduce the total interest you pay over the life of the loan.

Don't Overlook Personal Loan Fees

While, on paper, it may look like personal loans can help you save on interest, you need to consider the fees they may have. These can reduce the savings you’ll receive.

Many personal loans include an origination fee that varies depending on the lender you use. These fees can be as low as 1% or as high as 10% or more. Some lenders offer no origination fees, but they typically charge a higher interest rate.

To make comparisons easier, pay less attention to the advertised interest rate and more attention to the annual percentage rate (APR). This rate will include all potential fees when using the personal loan, which will give you a clearer picture of your overall savings.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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