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

Credit card debt is one of the most expensive types of debt to carry. With average interest rates around 20% and sometimes higher, it can grow out of control quickly. For many people, the idea of using a personal loan to pay off credit card debt sounds like the right thing to do.

Credit Card vs. Personal Loan Interest Rates

· Average credit card APR as of July 2025: 20.13%

· Average personal loan APR: 12.57%

This shows the potential for savings by consolidating high credit card debt with a lower-rate personal loan.

But is this a good idea, or are you simply shifting the problem to another set of circumstances? You have to assess the advantages, disadvantages, and alternatives to lock in an overall decision.

How a Debt Consolidation Loan for Credit Card Debt is Structured

A debt consolidation loan credit card plan is created by taking out a personal loan, then using the proceeds to pay off your credit cards. You are no longer managing multiple payments, each at a high interest rate; you will be responsible for one monthly payment (at -hopefully- a lower rate).

Here is how it works:

1. Get approved for a personal loan with better terms than your credit card(s).

2. Use the proceeds to make payments on existing balances.

3. Pay off the personal loan on your repayment schedule.

This method allows you to simplify the way you manage your debts and possibly save you money if you act responsibly.

Advantages of Becoming Debt-Free with a Personal Loan for High Interest Debt

The primary advantage of using a personal loan for high interest debt is cost savings. But there are many advantages to consider.

· Lower Interest Rates – generally, personal loans come with interest rates well below those of credit cards.

· Fixed Repayment Plan – compared to revolving credit, loans are timely and scheduled.

· Unified Repayment – It’s easier to budget with a consolidated balance, which is made into one payment.

· Improved credit score – if the revolving credit from credit cards is paid off, your utilization might decrease, resulting in a credit score increase.

· Knowing the End Date for Debt-Free – as the structured repayments suggest, you know when the personal loan will close.

Risks of Paying Off Credit Cards with a Loan

While the thought of utilizing a personal loan to pay off credit card debt can be attractive, there are potential dangers.

· Temptation to Use Credit Cards Again – Just paying off your cards doesn’t change spending behavior. If you swipe that card again, you will have double the debt.

· Fees and Costs – There may be origination fees or even prepayment penalties.

· High Loan Rates for Bad Credit – If your credit score is poor, the loan interest rates may not be much better than those of your credit cards.

· False Sense of Security – A loan can feel like a solution for a little while, but if you don’t have any budgeting discipline, you still have the same problem.

These dangers are similar to what you’d see with other forms of borrowing, like the online loan app risks discussed in Loan Apps vs. Traditional Lenders: Which Is Safer? Just because borrowing might be simpler doesn’t mean it will help you; discipline is required.

Pros and Cons at a Glance

Pros of Personal Loan for Credit Card Debt	Cons of Personal Loan for Credit Card Debt
Lower interest rates save money	May include fees and penalties
One fixed payment simplifies budgeting	Doesn’t address overspending habits
Clear payoff timeline	Risk of reusing paid-off cards
Can improve the credit utilization ratio	Rates may be high for poor credit borrowers

Are Personal Loans a Good Way to Pay Down Debt?

So, is a personal loan good to repay debt? This depends on your circumstances.

A personal loan makes sense if:

· You can get a loan with an interest rate significantly less than your credit card APR.

· You are committed to not using credit cards afterwards.

· You want a firm repayment timeline.

It may not make sense if:

· You have poor credit and will only be able to obtain high-rate loans.

· You have existing issues with overspending.

· The fees you will pay will maximum any potential interest savings.

Options Other Than a Personal Loan

If you are trying to determine if a personal loan to pay off your high-interest debt is the right option for you, use one of these alternatives:

· Balance Transfer Credit Card – You can transfer balances from old credit cards to a new credit card, which might offer a 0% introductory APR. Depending on the credit card company, you could incur balance transfer fees.

· Debt Management Plans (DMPs) – A registered non-profit organization can work with your creditors to potentially negotiate lower rates.

· Avalanche Method – Pay off the debts, starting with the highest interest rate.

· Snowball Method – Pay off small debts first for motivation, and subsequently, apply larger payments towards other debts.

Tips for Successfully Paying Off Debt with a Loan

If you decide to pay off your credit cards with a loan, here are some tips to help ensure you will be successful:

1. Shop Around – Many lenders offer different interest rates and terms. Find the one that works best for your personal situation.

2. Close or Freeze your Credit Cards – Ensure you do not continue to incur debt on your credit cards once they are paid off.

3. Automate your Payments – Make sure not to miss the due dates and incur penalties.

4. Track Your Spending – Design a budget to elaborate and prevent debt from occurring again.

5. Stay Disciplined – Remember that a personal loan is a tool to get you out of debt, and it is not an excuse to spend more money.

Wrap up

Taking out a personal loan to pay off credit card debt can be a savvy tactic as long as you’re careful, the debt consolidation loan credit card method lowers interest rates, average payment requests, and provides a clear repayment plan; however, if you continue to overspend, or take out a loan with a bad repayment plan, then you are opening yourself up to risks.

Ultimately, the answer to is a personal loan good for debt is discipline. For people who are ready to address their habit, it is a strong option. For people who won’t change, it is just moving the issue elsewhere.

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