Should You Get a Personal Loan to Pay Off Credit Card Debt?

Is a personal loan right for your credit card debt?

Before you apply for a personal loan to pay off credit cards, ask yourself these questions. Your answers will help you decide if it's the right move.

Check your debt situation

• How much credit card debt do you have? Add up all your credit card balances. Personal loans work best when you're consolidating at least $5,000 in debt. Smaller amounts may not save you enough in interest to justify the effort.
• What interest rates are you paying now? Check your credit card statements for your APR (annual percentage rate). If you're paying 20% or more, a personal loan could save you money. Personal loans typically range from 7% to 36%.
• Can you get a lower interest rate? Check your credit score for free at AnnualCreditReport.com. Scores above 670 usually qualify for better personal loan rates. Below that, you might not save much money.

Review your financial habits

• Why did you rack up credit card debt? Be honest. If overspending caused your debt, a personal loan won't fix the problem. You could end up with a loan payment and new credit card debt.
• Do you have a steady income? Personal loans require fixed monthly payments for two to seven years. Make sure your income can cover the payment without stretching your budget too thin.
• Will you stop using your credit cards? This is crucial. Many people pay off cards with a loan, then charge them up again. Consider closing cards or locking them away if you struggle with impulse spending.

Run the numbers

• Can you afford the monthly payment? Use an online loan calculator to estimate payments. A $10,000 loan at 12% for five years costs about $222 per month. If that's tight, you may need a longer loan term or smaller loan amount.
• Will you actually save money? Compare total interest paid on your current cards versus a personal loan. Factor in any origination fees (typically 1% to 8% of the loan amount).

What your answers mean

If you answered "yes" to most questions, a personal loan could help you pay off debt faster and cheaper. If you answered "no" to several questions — especially about spending habits or income stability — hold off. Work on budgeting and building your credit score first. A personal loan works best as part of a larger plan to get out of debt and stay out.

Benefits of using a personal loan for credit card debt

Taking out another loan to pay off credit card debt may seem counterintuitive, but there are benefits that come with using a personal loan to consolidate debt.

Get a lower interest rate

The primary advantage of consolidating credit card debt with a personal loan is the potential to qualify for a much lower interest rate. We say "potential" because the personal loan rate you get will depend largely on your creditworthiness, income and other factors.

To find out if you can get a personal loan with a lower rate than what your credit card charges, you can check your potential rate with a personal loan company.

The amount you can save in interest by consolidating credit card debts with a personal loan can be substantial. According to the Federal Reserve, the average credit card APR worked out to 21.39% in October 2025, whereas the average interest rate on a 24-month personal loan worked out to 11.14%.

If you have great credit, the best personal loans even offer rates as low as 6.99% (as of publication).

Not only are personal loan rates typically lower than credit card rates, but personal loan rates are usually fixed. This means most personal loan rates will not change over the course of their terms, so you can lock in a loan rate and move forward with your debt repayment plan. By contrast, credit card interest rates usually fluctuate based on market conditions.

» MORE: Interest rates and how they work

Have a set repayment plan

Another pitfall of a credit card is that you can make payments in perpetuity but never pay your balance off if you're still using your card for purchases. If you only make the minimum payment, it can be difficult to make much of a dent in your credit card debt at all, even over the course of several years.

By contrast, most personal loans come with a set monthly payment amount and repayment term. This means you'll know exactly how much you’ll need to pay each month to become debt-free by a specific date.

Keeping track of one fixed loan payment is also much easier than managing several different credit card payments, which Ben Markley of budgeting software YNAB says is a major benefit. In that sense, consolidating debt with a personal loan helps you save money while simplifying your financial life.

Improve your credit score

While applying for a personal loan will result in a hard inquiry that could temporarily ding your credit, a definitive debt payoff plan should offer the following short- and long-term benefits to your credit score:

1. Moving revolving debts from credit cards to an installment loan can substantially improve your credit utilization ratio.
2. You'll build and improve your payment history as you make timely payments on the personal loan.
3. Adding a personal loan to your credit profile can diversify your credit mix. Having a diverse mix of revolving and installment credit positively affects your credit score.

All of these factors combined should help you improve your credit steadily if you resist the temptation to rack up more debt.

Downsides of using a personal loan for credit card debt

Using a personal loan to pay off credit card debt can have major financial benefits, but there are also some drawbacks that may come into play depending on your situation. Consider the following before you take out a personal loan for debt consolidation.

You may not get approved for a better offer, or at all

If you’re struggling to qualify for a personal loan because of your credit score, you can ask if the lender will allow a co-signer.

If you have an overwhelming amount of high-interest credit card debt that's negatively affecting your credit score, it might be hard to qualify for a personal loan. If you have a low credit score but still manage to qualify for a personal loan, that loan’s interest rate may end up being as high as the rate on your credit cards.

That said, if you’re struggling to qualify for a personal loan because of your credit score, you can ask if the lender will allow a co-signer.

Your spending habits may not change

Markley says consolidating debt may help your immediate situation, but it might not address the underlying problem that got you in trouble in the first place.

"Paying off credit cards with a loan will not magically change your spending habits or the amount you owe," he said. "In fact, watching that credit card balance hit $0 might give you a false sense of security that produces more credit card spending, which could lead to even more debt."

Fees can apply

According to Markley, a lender might charge you an origination fee for a personal loan, which could take a serious bite out of any interest savings. Note that some origination fees can be as high as 10% of the loan amount that you qualify for, and an origination fee is usually deducted from the loan’s disbursed funds.

As an example, let's say you qualify for a $10,000 personal loan with an 8% origination fee. In this case, you would receive $9,200 in loan funds after the $800 origination fee is taken out. However, you would still be required to repay the full $10,000 loan principal.

Missed payments can snowball fast

When you take out a personal loan, the full payment is due every month like clockwork. Unlike with credit cards, you can’t make a minimum payment. Miss just one, and the consequences hit hard.

First comes a late fee of $25 to $50. Then your credit score drops 50 to 100 points — and that mark stays on your report for seven years. Future lenders will see it and charge you higher rates on everything. After 90 days, debt collectors start calling. Ignore it longer, and the lender can sue you and garnish your wages.

To avoid this mess, set up autopay so payments happen automatically. Build a small emergency fund to cover at least one month of payments. And if money gets tight, call your lender right away. Many offer hardship programs or temporary payment breaks.

» MORE: What affects your credit score?

How to get a personal loan for credit card debt

Before you hatch a plan to pay off credit card debt with a personal loan, you'll want to find the best possible loan you can qualify for. This means looking for a loan with:

• The lowest possible interest rate
• The lowest fees (or no fees)
• A repayment term you can live with
• A monthly payment you can afford
• The loan amount you need to consolidate the debt you have

While interest rates and fees can vary across loan companies, note that you'll typically find personal loans with repayment terms that last from 24 to 84 months. Also, you can usually customize your monthly payment by adjusting the length of your repayment term.

After you have researched a number of lenders and narrowed the options down to those that offer the best terms, it helps to gauge your approval odds for each lender within that small pool. This step can help you plan for the approximate interest rate, loan amount and monthly payment you may be able to qualify for.

After settling on a lender, you can apply online and usually get your loan funds in a matter of days. Once the funds are safely in your bank account, the following steps can help you get out, and stay out, of debt.

Personal loan eligibility and qualification requirements

Lenders look at several factors before approving your personal loan application. Here's what they check.

Credit score and credit history

Most lenders require a minimum credit score of 580 to 600, but you'll need 670 or higher to get competitive rates. They'll review your payment history, looking for late payments, defaults or bankruptcies. A clean credit history from the past two years matters most.

Income and employment

You'll need proof of steady income, usually pay stubs from the past two months or bank statements. Lenders prefer borrowers who've been at the same job for at least a year. Self-employed workers can qualify but may need to provide tax returns. Most lenders want to see minimum annual income of $25,000 to $35,000.

Debt-to-income ratio

This compares your monthly debt payments to your gross monthly income. Most lenders want your DTI below 36%, though some allow up to 43%. To calculate your DTI, add up all monthly debt payments (credit cards, car loans, student loans, mortgage) and divide by your gross monthly income.

Documentation and co-signers

Expect to provide a government-issued ID, proof of address, pay stubs and bank statements. If your credit or income falls short, adding a co-signer with strong credit can improve your approval odds and lower your interest rate. Just remember: your co-signer is equally responsible if you can't pay.

Steps to pay off credit card debt with a personal loan

Once you’ve signed on the dotted line for your personal loan, it’s time to put those funds toward your debt. That’s the easy part. The hard part is resisting the urge to use your available credit and making a plan to avoid racking up more debt.

1. Pay off your credit cards with your loan funds

After the loan funds are in your possession, use those funds to pay off and consolidate your credit card debts as soon as you can, before you have the opportunity to spend the money on something else.

If you weren't approved for the entire loan amount you need to pay all your credit cards off in full, you can at least pay off some of your credit cards in full while continuing to make payments on others. Start by paying off the credit cards with the highest interest rates.

2. Stop using your credit cards for purchases

To get out of debt, you have to adjust your spending habits. This means not using credit cards

for purchases at all. It may even be wise to put your credit cards in a safe or somewhere out of the way if you don't want the temptation.

That said, you shouldn't cancel your credit cards if you don't have to. The length of your credit history makes up 15% of your FICO score, and canceling a card will shorten your average credit account length. It will also reduce your total revolving credit limit, which can negatively affect your credit utilization ratio.

3. Create a monthly budget or spending plan

This step may not be easy, but it can help if you spend some time tracking your bank statements and credit card bills from previous months to see where all your money has been going.

Markley says you can start by taking inventory of the money you have on hand right now and deciding what you want every dollar to do before you get paid again.

"Write that down and determine what trade-offs you are willing to make," he said. "This will give you clarity about your money situation and help you feel less overwhelmed."

From here, you should aim to spend less than you earn each month, even if you have to make some cuts in discretionary spending categories like dining out, entertainment and groceries.

Ultimately, looking at your previous month's bank statements and credit card bills will tell you where you've been spending the most, and this can help you figure out where you can cut back to make the most impact.

4. Make on-time payments on your personal loan

You've paid off your credit card debt, created a budget and modified your spending habits. Now what? At this point, you need to stay the course by making on-time payments toward your debt consolidation loan.

Your loan balance will slowly decrease over time, and you should finally feel like you're making some progress. As long as you avoid racking up more debt, you will be debt-free by the time you make the final payment on your personal loan.

Debt payoff strategies: personal loan vs. snowball vs. avalanche

When it comes to paying off debt, there are several strategies you can deploy. A personal loan is often the best option for those with high balances and interest rates. But if your debt is more manageable, consider using the snowball or avalanche method.

Personal loan consolidation

You take out one loan to pay off all your credit cards, then make a single monthly payment at a (hopefully) lower interest rate. This option is best for people with good credit who can qualify for rates below 15% and have trouble juggling multiple payments.

Snowball method

Pay minimums on everything except your smallest debt. Throw all extra money at that one until it's gone, then move to the next smallest balance. This method is best for people who need quick wins to stay motivated.

Avalanche method

Pay minimums on everything except the debt with the highest interest rate. Attack that one first, then move to the next highest rate. This is best for people who want to save the most money and can stay motivated without quick wins.

Which debt payoff method should you choose?

Go with a personal loan if you have good credit and struggle with organization. Choose the snowball approach if you need motivation and don't mind paying extra interest. Pick the avalanche method if you're disciplined and want maximum savings. You can also combine strategies — use a personal loan for high-rate cards, then snowball the rest.

Alternatives to personal loans

If you are unsure about consolidating debt with a personal loan, keep in mind that there are other ways to get out of debt. Consider the following alternatives that can also help you save money and/or get out of debt faster.

Balance transfer credit card

Balance transfer credit cards let you consolidate debt at a 0% annual percentage rate (APR) for a period of up to 21 months. However, a balance transfer card charges balance transfer fees (usually 3% to 5% of the transferred amount), and its APR can increase dramatically after the zero-interest period ends.

Home equity products

If you have significant equity in your home, you can consider consolidating debt with a home equity loan or a home equity line of credit (HELOC). These loans use your home as collateral, and they can help you consolidate high-interest credit card debt at a low rate.

Like most personal loans, home equity loans usually have fixed interest rates, fixed monthly payments and a set repayment plan. Meanwhile, HELOCs typically come with variable rates (like credit cards) and base your monthly payment on how much you borrow from your approved credit line.

Debt settlement

You can also consider debt settlement, in which you or a third-party company negotiates with your creditors to settle your debts for less than you owe.

While debt settlement can potentially help you get out of debt faster and save you money, the Federal Trade Commission (FTC) points out that creditors are not required to let you settle for an amount that's less than your balance. And debt settlement companies may ask you to stop making payments on your debts while they negotiate on your behalf. Missed payments can cause considerable damage to your credit score.

Credit counseling

Credit counseling agencies offer free or low-cost financial consultation to those who are overwhelmed with debt. They can also help debtors put together a debt management plan (DMP).

A DMP is a type of debt consolidation in which a credit counselor negotiates with creditors to reduce a debtor’s interest rates, waive fees and adjust repayment terms. If the creditors agree to the DMP, the debtor’s debt payments are then consolidated into a single monthly payment made to the credit counseling agency.

A reviewer on our site mentioned that developing a DMP with a credit counseling agency helped them escape short-term stress and long-term debt. Marie from Massachusetts, wrote:

“Immediately, creditors stopped calling, and payments dropped. You still get a monthly statement, and I wasn’t opening a bill and seeing it would be paid off in 27 years. I saw that it would be paid off within a four-year period. I could anticipate being debt-free.”