Should you get a personal loan to pay off credit card debt?

JGI/Jamie Grill/Getty Images

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

In a perfect world, no one would need to take out a loan to consolidate and pay off debt. In the real world, however, there are times when borrowing money is the only way to dig your way out.

This is mostly due to high interest rates on credit cards. With the average credit card APR currently surpassing 17 percent, and many cards charging considerably more, consumers are stuck paying significant sums of money in interest with hardly any of their minimum payment goes toward paying down their credit card balances — and that’s if they’re able to stop using credit cards for purchases.

At the end of the day, these challenges are the reason many people consolidate their credit card debt with a personal loan with a lower interest rate.

When a personal loan makes sense for debt consolidation

While choosing to consolidate debt with a personal loan does mean you’re trading one kind of debt for another, this strategy comes with considerable advantages — at least for people who can qualify for a personal loan with affordable interest rates and fair terms.

Instances where using a personal loan to consolidate debt makes sense include:

You can qualify for a lower interest rate

Qualifying for a loan with the best interest rates and terms typically requires a FICO score of 670 or higher, according to However, that’s the minimum score you’ll want to have for your credit to be considered average, and it helps to have an even higher FICO score than that.

Either way, personal loans now frequently come with APRs as low as 5.99 percent. That’s considerably lower than you’ll pay with the average credit card, meaning your interest savings can be substantial.

You can consolidate your debts into one payment

If you’re juggling several different credit cards with their own payments and APRs, it can be difficult to organize a debt repayment plan and make sure you’re making and maximizing your payments each month. Using a personal loan to pay off debt helps you get rid of multiple payments and go down to one payment per month — and hopefully with a much lower APR.

You can secure a lower monthly payment

If you’re struggling under the weight of your credit card debt and you are still spending more on payments each month than you earn, a personal loan with a lower APR and set repayment schedule may be exactly what you need. You’ll need to play around with a debt consolidation calculator to know for sure, but it’s possible you can secure a lower monthly payment on your consolidated debt with a lower APR and a long enough repayment timeline.

You want to know exactly when you’ll be debt-free

One big problem with credit cards is if you keep using them for purchases, you may never pay off your debt. Personal loans, on the other hand, come with a fixed interest rate, a fixed monthly payment, and fixed repayment schedule that dictates the exact date you’ll pay off your debt for good.

If you’re tired of making payments toward credit cards but never making much progress, you might be better off consolidating debt with a personal loan, and then switching to cash or debit cards instead of plastic for purchases.

When a personal loan doesn’t make sense

Signing up for a personal loan to pay off credit cards can be a money-saving endeavor, but that’s not always the case. Signs you may want to try a different debt consolidation method completely can vary from person to person, but they may include the following:

You have a small amount of debt you can pay off quickly

If you have a fairly manageable amount of debt that you can comfortably pay off within 12 to 21 months, you may want to consider signing up for a balance-transfer credit card instead of a personal loan to pay off debt. With a 0 percent APR credit card, you can frequently secure zero interest on balance transfers for up to 21 months, although a balance transfer fee will likely apply.

While balance transfer fees may cost up to 3 percent to 5 percent of your transferred balances upfront, you could easily save hundreds of dollars or more on interest if you pay down debt during your introductory offer. Some balance transfer credit cards also offer rewards and consumer benefits, so make sure to compare offers.

You desperately need help with your debt

Finally, there are times when you might have so much debt you feel powerless to pay it off without help. In these circumstances, it’s possible working with a debt relief company or non-profit Consumer Credit Counseling Services may be your best bet. You can also look into debt management plans or debt settlement plans, although the Federal Trade Commission (FTC) warns that not all third-party companies offering debt relief help are reputable.

If you have so much debt that it seems mathematically impossible for you to pay it off in your lifetime, you might also be a candidate for bankruptcy. It can help to meet with a CCCS counselor before you decide. To weed out any bad players, the FTC says you should check out any agency you’re considering with your state Attorney General and local consumer protection agency.

The bottom line

Imagine never having to pay a credit card bill again, or actually having the money you want to take a vacation or do something fun. By focusing on debt repayment, you can free up cash each month — even if your main goal is simply having some extra money to save.

A personal loan can make a lot of sense for debt consolidation, but make sure to consider all the options and tools that may be available to you. Also remember that getting out of debt requires you to stop racking up more bills you can’t pay. No matter which debt reduction option you choose, stop using credit cards and switch to cash or your debit card while you’re in debt repayment mode.

Written by
Holly D. Johnson
Author, Award-Winning Writer
Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more.