Should You Use a Personal Loan to Pay Off Credit Cards?

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The average U.S. household has $6,662 in credit card debt and $37,172 in student loan debt. Talk about a scary combination.

But despite the lower average balance, credit cards might pose a greater threat to your financial well-being than student loans. Between sky-high interest rates and low minimum payments, there’s no end in sight for some borrowers.

So, if you’re neck-deep in credit card debt, find out how using a personal loan to pay off credit cards could be a good option for you.

How to use a personal loan to pay off credit cards

A personal loan to pay off credit cards is often called a credit card consolidation loan.

The idea is to get a credit card consolidation loan with a lower interest rate than what you’re paying on your credit card as well as a set repayment period. That way, you get a defined repayment plan.

For example, let’s say you have a $4,000 balance on your credit card with an 18.00% APR. If you qualified for a three-year personal loan with 12.00% APR, your monthly payment would be $133, and you’d pay $783 in total interest over the life of the loan.

If, however, you kept the debt on the credit card and paid $133 per month, it’d take you close to three and a half years to pay off the debt, and you’d pay $1,359 in interest during that time.

In other words, you’d save $576 by opting for a credit card consolidation loan.

Here’s a quick recap:

Product Repayment Term Total Interest Paid
Personal loan (12.00% APR) 36 months $783
Credit card (18.00% APR) 41 months $1,359

You also can use personal loans to pay off multiple credit cards by consolidating them all into one payment with one interest rate.

Advantages of using a personal loan to pay off credit cards

Personal loans will carry the biggest benefit if you’re currently paying high interest rates on multiple credit card accounts. Here’s why.

1. Potentially lower interest rate

Even a small change in your interest rate can make a big difference, especially if you have a lot of credit card debt. Keep in mind that there’s no guarantee your interest rate will be lower on a personal loan. It will depend on your creditworthiness.

2. A single payment

Moving debt from multiple credit cards to one credit card consolidation loan can simplify your debt payoff.

For example, you won’t have to worry about various payment dates and amounts. Plus, making one payment instead of several could help keep you on track and organized with your bill payments.

3. Quicker debt payoff

With just one debt payment every month and one fixed interest rate, you might be able to pay off your loans on a shorter timeline.

That’s mostly because credit cards don’t have a set repayment period. In fact, if your balance is high enough, you could never get out of debt by paying just the minimum payment.

Disadvantages of using a personal loan to pay off credit cards

Although there could be benefits to taking out a personal loan to pay off credit cards, it also carries inherent risks. Research your options and weigh these cons against the pros before taking out a credit card consolidation loan.

1. Potentially higher interest rates

Not all personal loan companies offer low interest rates. For example, Avant offers interest rates ranging from 9.95% through 35.99% APR.

That’s a massive range, and you typically need excellent credit to get the best rates. So, if your credit card interest rate stands at 18.00% APR and you qualify for a personal loan at a 25.00% APR, you’d be better off keeping the debt where it is.

2. You might not be able to afford it

If you have a large credit card balance, moving it to a credit card consolidation loan you have to pay off in just a few years might break your budget.

For example, if you moved $15,000 in debt to a three-year personal loan with a 12.00% APR, your monthly payment would be $498. If your budget is tight and you have no plans to make extra money to pay off your debt faster, it might be hard to manage.

3. You might have to pay a fee

Some personal loan companies charge an origination fee. This fee typically ranges from 1 percent to 6 percent of the loan amount. If you borrowed $15,000, for example, you’d pay between $150 and $900 upfront.

So, depending on the situation, using a personal loan to pay off credit cards could be more expensive, even if the loan has a lower interest rate.

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If you’re planning on taking out a personal loan, shopping around to get the best deal can be overwhelming and frustrating. That’s where LendingTree’s* personal loan shopping tool comes in. Just enter your information once, and you can get offers from multiple lenders, all without damaging your credit score. Because LendingTree works with dozens of lenders, you’re more likely to find a lender willing to lend to you and qualify for a competitive interest rate. *In full disclosure, LendingTree is our parent company

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Is a credit card consolidation loan the best move for you?

If you have a solid credit history and high-interest credit card debt, a credit card consolidation loan could help you save money on interest and repay your debt sooner.

Compare rates by personal loan companies like SoFi, and Upstart to see how they stack up.

And check out other top personal loan companies to see what they offer. Some even let you pre-qualify with a soft credit check, which won’t hurt your credit score.

If you can qualify for a low interest rate, a low or nonexistent origination fee, and a manageable monthly payment, the math could be in your favor. Use a credit card consolidation calculator to get the real numbers.

And if a credit card consolidation loan doesn’t seem like the way to go, another option you can consider is a balance transfer with a zero-interest credit card. These cards offer 0% APR promotions for a period, allowing you to pay down your debt with no interest at all.

Most cards, however, charge a balance transfer fee, which is usually between 3 percent and 5 percent. Also, if you don’t pay off the balance before the promotional period ends, you’re back to where you started, at least with regard to having a high interest rate.

At the end of the day, make sure you’re taking the time to consider all your credit card debt consolidation options. Even if you don’t qualify for the best deals out there, you’ll have the knowledge you need to create your next action plan for paying off your credit cards effectively.

Paula Pant contributed to this article.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

RATES (APR)loan amount
5.99% – 17.88%1 $5,000 to $100,000
5.69% – 35.99% $1,000 to $50,000
6.98% – 35.89%* $1,000 to $50,000
5.99% – 24.99%3 $5,000 to $35,000
5.99% – 29.99%4 $7,500 to $40,000
15.49% – 35.99% $2,000 to $25,000
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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 17.88% APR (with AutoPay). Variable rates from 6.49% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of November 4, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.49% APR assumes current 1-month LIBOR rate of 1.81% plus 3.08% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 5.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Personal loans made through Upgrade feature APRs of 6.98%-35.89%. All personal loans have a 1.5% to 6% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by WebBank, Member FDIC.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.