Pros and Cons of Personal Loans to Pay Off Credit Card Debt

Updated on April 9, 2024

When debt seems to be continuously piling up on your credit card, you no longer have any hopes that you can get rid of that rising interest. However, more and more people nowadays are leaning towards personal loans, as they seem to be a great choice to pay off your credit card debt.

What Is a Personal Loan?

As its name suggests, a personal loan is a loan that you take out for personal purposes. These loans can be used to pay a medical expense, buy an air conditioner, finance a trip – and pretty much everything. They are the total opposite of commercial loans, business loans of mortgages that have a fixed purpose. With a personal loan, you don’t have to give expenses for why you need it.

What Is Debt Consolidation?

Debt consolidation takes your multiple high interest debts (e.g. credit card debt) and rolls them into one single low interest payment. It has the ability to reduce the total debt that you have to pay by keeping the principal – but reducing the interest. This allows you to pay the debt off much faster.

Pros and Cons of Personal Loans to Pay Off Credit Card Debt

When it comes to credit card debt, personal loans have always proven to be a very good way to keep things under control. That being said, there are also several advantages and drawbacks that you might want to consider with this alternative.

Pros of Credit Paying of Credit Cards with a Personal Loan

Not sure whether you should use a personal loan to pay off your credit card debt or not? Here are a few reasons why you might actually want to consider this idea.

Consolidated Payments

Credit card debt generally branches out in several multiple payments that you will have to pay separately. However, by taking out a personal loan to pay off that debt, you will be bundling it together under the same loan – therefore making your payments much easier. Since the average household carries about $16,048 per month in credit card debt, this makes the payments much easier.

Lower Interest Rates

Credit card debt has quite a big interest rate – which can get particularly bad if you have multiple credit card loans. However, since personal loans generally hold a much smaller interest rate, you will no longer have to pay as much – therefore, allowing you to save money on the repayment.

Lower Monthly Payments

When you take out a personal loan, you may decide on a specific sum that you can pay every month – as opposed to credit card debt that has to be paid as soon as possible. This way, you can set a payment sum that you are able to afford every month – one that will allow you precisely to know when you will finish with your debt.

Boosted Credit Score

Your credit score is influenced by a variety of things. For example, if you sit too much on your credit card debt, your credit history will also be affected – therefore, hurting your FICO score. By using a personal loan to pay off your debt, you will send your credit score on a “healing spree” – one that will boost up your score.

Quicker Payoff

When you have so much debt with such a high interest rate, it might be rather difficult for you to pay it off. However, since you will no longer have to deal with the exorbitant interest rate, it will be much easier for you to pay off your debt in a quicker manner.

Cons of Credit Paying of Credit Cards with a Personal Loan

Granted, there are many advantages when it comes to using a personal loan to pay your credit card debt. However, there are also quite a few advantages that you might want to keep in mind.

You Might Not Qualify

Many people can qualify for personal loans, as they are the type of loans for “everyone,” so to speak. However, if you have a very low credit score and more than $10,000 debt, then it might be rather difficult for you to get a hold of a personal loan. In this case, a settlement program might actually prove to be quite useful.

More Possible Debt

Indeed, if you pay off your credit cards by using the money from a personal loan, you will clear up your line of credit. However, if you use the cards again and are in an inability to pay, you may just end up in even greater debt. Now, you’ll have both the current credit debt and the personal loan on your hands.

Interest Rate Might Not Go Down

There is no actual guarantee that the interest rate of the personal loan will go down – and you can’t be sure that it will be lower in comparison to your current debt. It will depend on your credit score and the exact value of your debt consolidation loan.

Monthly Payment Could Increase

You may get a lower interest rate – but there is also the chance that your personal loan can stretch out your repayment method. For instance, you may have a debt that you normally would have repaid in two years – but now that you switched to a personal loan, that debt might take five years to finish repaying.


You may not like it, but there are times when you might have to pay in order to get your hands on a personal loan. Depending on the lender that you are working with, you might just end up having to pay more fees than you originally had to deal with.

What to Consider When Reviewing Personal Loan Offers

When reviewing a personal loan offer, there are certain things that you might want to keep in mind. Here is what you should keep an eye out for:


The APR – or the annual percentage rate – is the sum of interest and extra fees that are calculated on a yearly basis. If there aren’t any fees on the loan, then the APR is exactly the same as the interest rate.

Term Length

How long will you have to pay for this loan? If the term is way longer in comparison to your initial debt, then you may want to reconsider making the switch. It might look like you are paying less, but in truth, you will only be dragging the payment more.


The fewer fees a loan has, the better. Granted, it might not be easy to find a loan that has no fees other than the interest rate – but you don’t want to go for one that is drowning in fees either. Browse through loans and go for the one that has the fewest fees possible.

Loan Amount

Make sure that you also check the loan amount that you may be given. The last thing you want is to take out a loan that will not cover your original loan – and then you will end up having to repay both of them. This might bring you into a higher amount of debt.

Personal Loan Alternatives

Aside from going for a personal loan, there are several other alternatives that you can choose. Since not everyone may qualify for a personal loan for a variety of reasons (lack of documents, low interest rate, etc.) they will have to find those funds somewhere else. These alternatives include:

Borrowing from Friends or Family

When at a complete loss, many people rely on their friends and family for a loan. In most cases, it is a less troublesome way to get the funds, without having to go through all the bureaucracy of an official lender.


  • You may no longer have to sign any complicated paperwork
  • The waiting time has been cut down
  • You may be able to get a low interest (or free interest) loan
  • If you can’t pay exactly on the due date, you may easily discuss an extension


  • If you do not pay the loan back, it might strain your relationship

Home Equity Line of Credit (HELOC)

If you are a homeowner that has a decent amount of equity on their house, then you may borrow against your house and then consolidate that debt by the use of a home equity loan. Home equity lines of credit always prove to be a convenient alternative.


  • Interest rates are lower
  • You may borrow bigger sums, depending on your house
  • There will be fewer fees to pay


  • Since you put your house up as collateral, you risk losing it if you are in an inability to pay

Balance Transfer Credit Card

More often than not, a balance transfer credit card loan features a 0% promotional interest rate for a limited time. This is quite convenient for you, as you will be exempt from paying the interest rate for the first few months.


  • You won’t have to pay interest at the beginning
  • It gives you time to settle through your finances
  • Some do not have balance transfer fees


  • The fees may be rather high once the promotional time expires

4 Questions to Consider Before Taking a Personal Loan

Before you take out a personal loan, there are several crucial questions that you may want to ask yourself. Some of these questions will revolve around yourself, whereas others will revolve around the lender. Here are some of the top questions that you need to have in mind:

Is the Interest Rate More Competitive?

In most cases, the interest rate of a personal loan is much lower in comparison to the one you have on your credit card debt. That being said, you also need to remember that your credit score greatly influences the interest rate. So, if you allowed your debt to “stew” for quite some time before making the switch, there is a chance that you may have to pay an equally high interest rate.

Can You Handle the Monthly Payment?

The beauty of credit card debt is that it can be repaid immediately, even within one month – provided you have the money. However, with personal loans, that payment will be sectioned through quite some time – years maybe. This is why you need to ask yourself: can you afford the monthly payment? Are you completely certain that your job will hold you off enough for you to pay the loan? Make sure to know the answer to that.

Will the Loan Cost You More in the Long Run?

Think about how much you will have to pay for the loan in the future. For example, if your original loan has to be repaid within a year, your consolidated loan might take more than 3 years to repay completely. If the interest rate is very low, then you might get off easy. However, in some cases, you might end up having to pay extra fees for a longer loan. Make sure that you do not have to pay more on the loan in the long run.

Can Taking on More Debt Be Avoided?

If you take out a personal loan, can you avoid taking out any more debt? Think about whether you will be able to repay the loan or not. Are the payments manageable for you? If it’s a sum that you won’t be able to pay, you will end up borrowing or using your credit card again – which will send you in even more debt. Make sure that the loan that you are committing to won’t create the perfect environment for even more debt.

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Final Thoughts

Sometimes, credit card debt can become really difficult to handle – in which case, a personal loan may come to your rescue. When your debts keep piling up at incredibly high interest rates, a personal loan might help you bring everything together – all at a much lower and manageable rate.

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