Pay off Credit Card with Personal Loan? Yes or No?

According to NerdWallet’s 2024 survey conducted online by The Harris Poll only 19% of Americans do not use credit and millions of Americans struggle with unsecured credit card balances, often leading to long-term financial stress.One solution people consider is using a personal loan to pay off credit cards.But is it the best strategy to pay off credit card?

What Is a Personal Loan for Debt Consolidation?

A personal loan is an unsecured loan with a fixed interest rate, paid off over a set term, usually 2 to 5 years.When used for debt consolidation, the goal is to pay off high-interest credit cards and replace them with a single, structured payment.

The Potential Benefits:

Simplified payments: just one due date each month

Fixed payoff timeline: know when you’ll be debt-free

Lower interest rates: may offer lower interest than some credit cards

The Realistic Drawbacks:

If you have poor credit, you may not qualify for a lower rate which could be no different than your current credit card

Origination fees and other loan costs can add up

Risk of accumulating new credit card debt if habits don’t change

When Is a Personal Loan a Good Option?

A personal loan might be right for you if:

Your credit score is strong enough (typically 640+)

You’re committed to not using your credit cards again

You’ve created a realistic monthly budget

You’ve compared loan offers and found a lower interest rate than what you’re paying now

Example: If you owe $8,000 on multiple credit cards with an average 24.99% APR and qualify for a personal loan at 10%, you could save hundreds in interest and finish paying off your debt sooner.

What If You Have a Lower Credit Score?

If your credit score is under 640, which is common for those with high credit card balances, you may find:

Loan offers come with very high interest rates

You may be denied a personal loan outright by many lenders

Monthly loan payments could be unaffordable

In this case, a personal loan might not improve your financial situation and could even make it worse.

If this is the case don’t worry, there are other options to help with your credit card debt.

Alternatives to Personal Loans for Credit Card Debt

Debt Management Plan (DMP) – A Structured, Low-Cost Option

Offered by nonprofit organizations like American Consumer Credit Counseling (ACCC)

Combines debts into one easier to manage payment

May reduce or eliminate interest rates (often to 0–10%)

No need for a loan or credit approval

Balance Transfer Cards – Best for Those With Fair to Good Credit

0% APR promotional offers (usually 12–18 months)

Good if you can pay off debt during promo period, otherwise you are kicking the can down the road

May require credit scores of 670+

Caution: can develop bad spending habits because of the seemingly consequence free nature of spending

How to Make the Right Decision

Ask yourself these questions before applying for a personal loan:

Can I get a better rate than I’m paying on my cards?

Can I realistically afford the monthly loan payment?

Am I ready to stop using my credit cards during repayment?

Have I explored lower-risk options like a debt management plan?

Reminder: A personal loan is just a tool; it won’t fix overspending or poor budgeting habits on its own.

Conclusion: There Are Smarter Ways to Get Out of Debt

While using a personal loan to pay off credit cards sounds appealing, it’s not a one-size-fits-all solution especially if your credit score is low.For many consumers, alternatives like debt management plans offer more support, fewer fees, and better long-term outcomes.

Not sure where to start? Schedule a free credit counseling session with ACCC today.Our certified counselors can help you explore the safest, most effective way to tackle your debt.

Disclaimer: This story is auto-aggregated by a computer program and has not been created or edited by mycardopinions.
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Frequently Asked Questions

Certainly. Unlike personal loans, you won't face any penalties for settling your balance ahead of schedule. However, it's crucial to keep in mind that if your credit card comes with a 0% introductory offer, it's essential to clear your balance completely before the 0% promotion expires and interest charges apply.

However, you can include additional cardholders, each with their own card. While sharing the single credit limit, the primary cardholder remains responsible for settling the debt.

Potentially, yes. Credit card APRs are typically variable, allowing lenders to change rates, impacting your monthly payments. Additionally, be mindful that introductory 0% offers can lead to higher interest rates once they expire. So, it's wise to clear your balance before that happens, if feasible.

Indeed, credit builder cards exist for those with less-than-ideal credit scores. These cards offer lower credit limits (typically £150 to £1,200) and higher interest rates. Responsible use, including full and on-time payments, can gradually boost your creditworthiness, potentially opening doors to better credit card offers down the line.