Are Personal Loans a Good Option For Paying Off Credit Card Debts?

When it comes to consolidating credit card debt, there are many options to consider. Personal loans are a top choice due to how easy they are to apply for.

In a perfect world, people would not need to borrow money to pay off their debts. However, in reality, borrowing money is often the only option when trying to get out of debt. Due to the high-interest rates that people are paying on credit cards, it is often difficult for people to get out of debt. Even though they have the minimum payment, they are still stuck with paying a huge amount of money in interest. With a lower interest rate, they can get out of debt faster. The Consumer Financial Protection Bureau (CFPB) notes that carrying a balance month-to-month is one of the most common and costly financial habits among American consumers.

When Personal Loans Make Sense for Consolidating Debts

A personal loan may be the best option for people who are trying to consolidate their debts. Although it may seem like a risky strategy, consolidating debt with a personal loan can be beneficial for people who are looking to get out of debt faster. With a low-interest rate and fair terms, this type of loan can be a suitable option. Lenders such as SoFi and Marcus by Goldman Sachs have made it easier than ever to apply for and receive a personal loan online, often with funding in as little as one to two business days.

Benefits of Personal Loans

1. Qualify for Lower Interest Rates

As of April 28, 2026, the average APR for a personal loan is approximately 11.31%, according to the Federal Reserve’s consumer credit report. That’s substantially lower than the average credit card APR of 21.47%. With a lower rate, it can provide substantial interest savings over the life of your repayment period. According to myFICO.com, a person who is looking to get a personal loan should have a FICO Score of 670 or higher to qualify for the best interest rates and terms. However, this is the minimum score that people should have to be considered for a loan. The higher your credit score is, the better rates you will be offered when applying for a personal loan. Experian, one of the three major credit bureaus alongside Equifax and TransUnion, recommends actively monitoring your credit profile before applying so you can address any errors that might be suppressing your score.

2. Consolidate All Debt Payments Into One

It can be hard to establish a debt repayment plan if you have multiple credit cards and high-interest rates. Having a manageable monthly payment is important to ensure that you stay on track to getting debt free. Getting a personal loan can help consolidate all of your debts into one payment and lower your interest rate. The CFPB provides a helpful debt repayment tool that allows you to model different payoff scenarios based on your current balances and interest rates.

A debt repayment calculator can help you estimate how much you can reduce your interest rate and pay off your debts at a faster pace. For example, let’s assume that you have $5,000 in debt with a 17% interest rate and $7,000 in debt with a 21% interest rate. You can only make a total of $200 payments each month on the two credit cards. If you have a high-interest rate and are not making the necessary payments on your credit cards, then you will not be able to pay off the debts. If you have a personal loan with a 10% interest rate, you can easily contribute $200 a month and start reducing your debts quickly. Your debt-to-income ratio (DTI) will also be an important factor that lenders like Chase, Discover, and LightStream evaluate when determining whether you qualify for a consolidation loan.

3. Obtain a Lower Monthly Payment

If you are struggling with high credit card debt and are not able to make the necessary payments, a personal loan may be the ideal solution. Having a lower interest rate and a repayment schedule can help you pay off the debts faster. You may be able to consolidate all of your debts into one payment and lower your payments. With a lower monthly payment and a long repayment period, you can achieve a lower APR and lower payments. It is worth noting that extending your repayment term may lower your monthly payment but can increase the total amount of interest paid over time — a trade-off the CFPB advises borrowers to weigh carefully before committing to longer loan terms.

4. Obtain a Time-Frame to Be Debt Free

One of the biggest issues with credit cards is that if you use them for purchases, you might never be able to pay off the debt. On the other hand, with a personal loan, you have a fixed interest rate, a monthly payment, and a repayment schedule that can be adjusted to meet the specific date that you’ll be able to eliminate your debts. Most personal loans offered through institutions like SoFi, LendingClub, and Upgrade carry repayment terms ranging from 24 to 84 months, giving borrowers a clear end date that revolving credit card debt simply does not provide.

If you are not making enough progress on your credit card bills, then you might want to consider getting a personal loan instead. This type of loan can consolidate all your debts into one monthly payment and reduce your interest rate. Before applying, it is a good idea to check your credit report through AnnualCreditReport.com, the official site authorized by federal law for free credit report access, to ensure your information is accurate and up to date.

When Personal Loans Aren’t The Best Choice

Although a personal loan can be beneficial when it comes to paying off credit cards, it’s not always the best idea to take out a loan to consolidate all of your debts. There are a few instances where you might want to try a different method.

1. You Don’t Have a Large Amount of Debt

If you have a manageable amount of debt, then you might be able to consolidate it into one payment and reduce the interest rate with a balance transfer credit card. With a zero-percent APR card, you can easily pay off your debts in less than two years. Although there may be a fee associated with transferring your balances — typically between 3% and 5% of the transferred amount, according to Bankrate’s balance transfer research — you could potentially save hundreds of dollars in interest by paying off your debts early. Some credit cards even have consumer benefits and rewards programs, so make sure to check them out before signing up.

2. You Won’t Be Changing Your Spending Habits

If you have a large credit card balance, you might end up spending more than you can afford to. Paying off your debts early can help you avoid getting into more financial trouble if you continue to spend the same way. Before you start applying for a debt consolidation loan, you must have a comprehensive financial strategy. This can include consulting a financial coach or learning about budgeting methods such as the 50/30/20 rule. The FDIC offers free financial literacy resources through its Money Smart program that can help you build a realistic budget before taking on new debt. After you have a good idea of what works for you, then you can start making the necessary changes to improve your financial situation.

3. You Need Help With Your Financial Situation

Sometimes, people who have a large amount of debt can feel overwhelmed and unable to make their payments on their own. If this is the case, you may be able to benefit from a debt relief program or a non-profit organization. Although the FTC has issued a warning about certain third-party debt settlement companies, it’s still important to check out their legitimacy. The National Foundation for Credit Counseling (NFCC) maintains a nationwide directory of accredited, non-profit credit counseling agencies that can help you evaluate your options at little or no cost.

If you have a large amount of debt that will be hard to pay off in the foreseeable future, then you might be considered a candidate for bankruptcy. Before you decide to file for bankruptcy, you should talk to a certified consumer counseling service (CCCS) counselor. The Federal Trade Commission (FTC) also suggests that consumers check out any agency that they’re considering working with. Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), individuals are required to complete an approved credit counseling course within 180 days before filing, which means speaking with a qualified counselor is not just helpful — it is legally required.

Frequently Asked Questions

Is it a good idea to use a personal loan to pay off credit card debt?

Yes, in most cases it is a smart strategy if you qualify for a meaningfully lower interest rate. As of April 28, 2026, the average personal loan APR is around 11.31%, compared to the average credit card APR of 21.47%. By refinancing high-interest revolving debt into a fixed-rate personal loan, you can reduce total interest costs and establish a clear payoff timeline.

What credit score do I need to get a personal loan for debt consolidation?

Most lenders require a FICO Score of at least 670 to qualify for competitive rates on a personal loan. Borrowers with scores above 720 will typically receive the lowest available APRs. If your score is below 670, you may still qualify with some lenders, but the interest rate offered may not be low enough to justify consolidating.

How much can I save by consolidating credit card debt with a personal loan?

Savings depend on your total debt amount, current interest rates, and the rate you qualify for. For example, consolidating $12,000 in credit card debt at an average APR of 21.47% into a personal loan at 11.31% over 48 months could save you over $3,000 in interest. Using a debt consolidation calculator can give you a more precise estimate based on your specific situation.

Will taking out a personal loan hurt my credit score?

Applying for a personal loan results in a hard inquiry on your credit report, which may temporarily lower your FICO Score by a few points. However, if you use the loan to pay off credit card balances, your credit utilization ratio will decrease — which is a significant factor in your score and can lead to an overall improvement over time, according to Experian.

What is the difference between a personal loan and a balance transfer credit card for debt consolidation?

A balance transfer card offers a 0% introductory APR for a set period — typically 12 to 21 months — making it ideal for smaller debts you can realistically pay off within that window. A personal loan offers a fixed interest rate and a longer repayment term, making it better suited for larger balances that need more time to pay down. Balance transfers usually carry a fee of 3% to 5% of the transferred amount.

What fees should I watch out for with a debt consolidation personal loan?

The most common fee is an origination fee, which typically ranges from 1% to 8% of the loan amount and is usually deducted from the funds before disbursement. Some lenders, including SoFi and Marcus by Goldman Sachs, offer personal loans with no origination fees. You should also check for prepayment penalties, though these are increasingly rare among reputable online lenders.

What debt-to-income ratio (DTI) do lenders look for when approving a personal loan?

Most lenders prefer a DTI of 36% or lower, though some will approve borrowers with a DTI as high as 50% depending on other factors like credit score and income stability. Your DTI is calculated by dividing your total monthly debt payments by your gross monthly income. The CFPB recommends keeping your DTI below 43% to maintain financial flexibility.

Are there alternatives to personal loans for paying off credit card debt?

Yes. Alternatives include balance transfer credit cards (best for smaller debts), home equity loans or HELOCs (which offer lower rates but put your home at risk), nonprofit debt management plans through organizations like the NFCC, and in extreme cases, bankruptcy protection. The right option depends on your total debt load, credit score, and long-term financial goals.

What happens if I take out a personal loan but keep using my credit cards?

This is one of the most common pitfalls of debt consolidation. If you pay off your credit cards with a personal loan and then continue to charge new purchases, you could end up with both the loan payment and new credit card balances — effectively doubling your debt. Financial advisors and the NFCC strongly recommend pausing or limiting credit card use while repaying a consolidation loan.

Can I get a personal loan for debt consolidation if I have bad credit?

It is possible, but challenging. Some lenders specialize in personal loans for borrowers with fair or poor credit (FICO Scores below 670), though the interest rates offered may be high enough to reduce or eliminate the benefit of consolidating. If your credit is poor, working with a nonprofit credit counseling agency or enrolling in a debt management plan may be a more cost-effective option before pursuing a personal loan.