Should I Pay off my Credit Card with a Personal Loan?

Credit card debt is one of the most troubling and challenging elements of personal finance. It can feel like you will never be able to pay it off, and each month, paying the credit card bill makes your other financial goals feel out of reach and distant. Outstanding credit card debt can hurt your credit score and make your life more difficult as you apply for future loans or credit. If you have damaged your credit score by accumulating large credit card debt, some experts recommend paying off your credit card with a personal loan.

Experts say that there are two primary benefits to paying off your credit card with a personal loan. The first is that the interest rate is almost always lower than a credit card interest rate. Credit card interest rates can be over 15% even if you have good credit. However, if you don’t have good credit and you’re trying to pay off your credit card with a personal loan, you may not even be approved for the loan, or your personal loan may be much higher interest that is typically seen for that type of loan. It’s important to consider the pros and cons of a personal loan used for this purpose.

The second benefit to paying off your credit card with a personal loan is that it can greatly improve a credit score, particularly if you always pay your personal loan bill on time and stay up to date with payments. When you carry debt on a loan, it doesn’t affect your credit the way that having debt on a credit card does.

However, paying off a credit card with a personal loan is a short term solution to a larger financial problem. Even without the credit card or cards hanging over your head, you must still make your regular, timely payments on the personal loan.

Credit card debt can be difficult to wrap your head around, particularly when you just want to be able to pay everything off any never have to worry about it again. But using a personal loan to pay off a credit card is a decision that should be thoughtfully considered as an option for improving a credit score or achieving a lower credit card interest rate.

Cain & Daniels, Inc.

Written by

Cain & Daniels, Inc. specializes in the settlements of commercial business debts such as lawsuits, judgments and past dues. Located in Tampa, Florida.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade