3 Ways to Decide If Credit Card Loans Are Right for You

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The average American credit card holder has more than $4,000 in credit card debt.

If that sounds like you (and you’re drowning in credit card bills), then it’s time to consider changing up your debt repayment plan. If you don’t, you could be stuck with credit card debt for years to come thanks to high interest rates and low minimum payments.

Credit card loans can help lower your interest rate and encourage you to pay down your debt faster. But they’re not the best choice for everyone, so it’s important to know what you’re applying for and whether it’s the right fit for your situation. Here’s how you can get started.

What are credit card loans?

A credit card loan, also known as a credit card consolidation loan, is a personal loan you can use to consolidate credit card debt. Unlike credit cards, credit card loans have a set loan term.

But depending on your creditworthiness, budget, and other options, credit card loans might not be the best choice for you. To help you decide, here are three questions to consider.

1. Can you qualify for a lower interest rate?

The average credit card APR is 16.15%, according to a November 2017 report from CreditCards.com. Here are a few companies that offer credit card loans with interest rates lower than that:

Lender Interest Rate Minimum Credit Score Minimum Annual Income
SoFi 5.99% – 20.01% None $50,000
Earnest 5.99% – 17.24% 660 None

The fact that you meet the lender’s minimum credit score and income requirements doesn’t mean you’ll get a low interest rate, though. The better your credit history and income are, the lower your interest rate will be.

In some cases, it might be worth trying to get a co-signer on the loan to improve your chances of getting a lower interest rate. But if you can’t find a co-signer and don’t qualify for a better rate on your own, you won’t be better off with a credit card consolidation loan.

To help you see what your chances of getting a lower rate are, these and other lenders allow you to pre-qualify with a soft credit check, which won’t hurt your credit score.

You’ll get to see some preliminary offers based on that credit check, which can give you an estimated interest rate to work with.

2. Can you manage the new monthly payment?

Since credit card loans have a set repayment term, you might end up with a higher monthly payment than you’re comfortable with.

For example, say you have $10,000 in credit card debt with a 17.00% APR and your minimum monthly payment is $100. If you were to consolidate with a five-year credit card loan with a 10.00% APR, your monthly payment would be $212.

Calculate your monthly payment using Student Loan Hero’s monthly payment calculator.

If that amount fits in your budget, you’re in good shape. You’ll have a lower interest rate and a clear payoff date. If you can’t afford $212 per month, however, consolidating could put you in a position where you’d need even more debt to cover the shortfall.

3. Is a balance transfer better?

Credit card consolidation loans aren’t the only way to pay off credit card debt more efficiently. Depending on your credit situation, you might be able to pay off your credit cards with another credit card.

Some credit cards offer 0% APR promotions on balance transfers. For example, the Citi Simplicity card gives you 21 months to pay off a balance transfer with no interest.

Say you can qualify for that card and the APR after the promotional period is 17.00%. Here’s how the math works out for your different options:

Payoff Method Monthly Payment Payoff Period Interest/Fees Paid
Original credit card $100 Never* N/A
Credit card consolidation loan $212 60 months $2,748**
Balance transfer card $212 54 months $1,433
Balance transfer card $476 21 months $0

*The 17.00% APR on the card is high enough that you’ll never pay off the balance with just $100 per month.
**You might have to pay an origination fee on top of this amount. For loans that charge origination fees, they typically range from 1 percent to 6 percent of the loan amount.
You might have to pay a balance transfer fee on top of this amount. For cards that charge balance transfer fees, they typically range from 2 percent to 5 percent of the transferred amount.

Whether you plan to pay off the balance transfer card by the end of the promotional period or stick with the same payment as the credit card loan, the math works out in your favor in this scenario.

But it won’t be the same in every situation, especially if you revert to making the minimum credit card payment. In other words, a balance transfer card requires more discipline.

If you think you might be tempted to cheat on your debt payoff plan by lowering your monthly payments down the road, use a credit card loan; the structured payment plan doesn’t give you an opportunity to cheat.

Avoid analysis paralysis when it comes to credit card loans

It’s not always easy to know whether credit card consolidation loans are right for you. You might get stuck on the math or second-guess your motivation to stick with the payoff plan. But it’s important to avoid putting off a decision.

Use an online credit card consolidation calculator and balance transfer calculator to see the numbers. Then, compare different balance transfer credit cards and credit card loans to see what kinds of offers you qualify for and which one works best for you.

Even if you don’t choose the option that makes the most sense financially, choosing an option that’ll save you money is a good start.

Interested in a personal loan?

LendingTree allows you to compare rates from multiple lenders by filling out one easy form. 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.

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% – 20.01%1 $5,000 to $100,000
6.14% – 35.99% $1,000 to $50,000
6.98% – 35.89%* $1,000 to $50,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $35,000
5.99% – 29.99%4 $7,500 to $40,000
compare rates on Lendingtree now
NMLS #1136: Terms & Conditions Apply
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 20.01% APR (with AutoPay). Variable rates from 6.49% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of November 15, 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 4.93% 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 Opploans.

Opploans Disclosures

Direct Deposit required for payroll.

Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5.  

    Rates and terms vary by state.

3 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.
4 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.

Published in Credit & Debt, Loans