Mar 04, 2024

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It’s not unusual for people to find that they’ve taken on too much debt. It might be due to the sudden loss of a paycheck or an unexpected expense, or to a planned adventure like a dream vacation. Perhaps you’re starting a new business.

No matter the reason, in today’s world it’s easy to ring up credit card debt. If that amount gets really high, it may feel like there’s no way you can pay it all back.

There are ways to manage your higher-rate credit card debt. Start by examining your finances and work to create a budget. Then look at your options. For example, if having one set regular monthly payment would help you keep to your budget, you might also consider consolidating into a personal loan to pay off debt. This approach may even save money on higher-rate interest.

To help you think about whether debt consolidation is a good choice for you, we’ve summarized the pros and cons of using a personal loan to pay off credit cards.

Pros of using a personal loan to pay off debt

Paying off credit card debts may make it easier to manage your money

Many people have used personal loans to pay off debt. Some find that it makes money management easier. For instance, 85% of surveyed debt consolidation customers told us their Discover® personal loan was simpler than their other financial options.* One personal loan for debt consolidation lets you combine several high-interest credit card debts into one set regular monthly payment, with a fixed interest rate and repayment term.

It may save you money in interest

In addition, personal loan interest rates are often lower than credit card rates. That is important, as a lower interest rate means more of your payment will be going toward principal each month.

With more of your money going toward principal and less toward interest, you will be able to pay down your credit cards sooner. In fact, 88% of surveyed debt consolidation customers told us they expect to pay off existing debt sooner with a Discover personal loan, with the majority of them reporting that they will pay it off an average of 2 years earlier.*

It can help you know when you may be debt free

Another advantage of consolidating credit card debt into a personal loan is the defined end date for your loan. The payment may be larger than the minimum balance on credit card accounts, which may be as little as 1% or 2% of the balance. However, if you pay back a personal loan on time each month, you may have the relief of seeing your balance disappearing. That’s something to look forward to.

Fixed monthly payments allow for easier budgeting

Credit cards may be a convenient form of payment for many people. However, credit cards have variable interest rates, so if rates increase, you could end up paying more. They are also a form of revolving credit. That means if you don’t pay off your balance in full every month, you could end up paying a lot in interest.

With a personal installment loan, you’ll have one set regular monthly payment. This makes it easier to budget, because you know exactly how much you will pay toward your loan every month.

Cons of using a personal loan to pay off debt

It is not a solution by itself

A personal loan for debt consolidation may be useful if you have higher-interest credit card debt. But creating good financial health requires more than a single tool.

If you have too much debt, or what is considered bad debt, you may want to shore up your credit health before taking out another loan and adding to your debt burden. To achieve this, it is important that you reduce your higher-interest debt as much as possible and do your best to avoid going into debt again.

Some lenders may charge you fees

If you are thinking about getting a personal loan to pay off credit card debt, be sure to compare different lenders and calculate the total cost of borrowing before applying.

This step is crucial because, in addition to interest, some lenders charge application fees, origination fees, prepayment penalties, late payment fees, payment processing fees, and more. When these fees add up, they may reduce or eliminate any potential savings. Fees can be avoided. With Discover Personal Loans, for example, there are no fees at all as long as you pay on time.

Your credit health affects your interest rate

The average interest rate for credit cards is typically higher than for personal loans. It is important, though, to do research to know if you might qualify for a better rate.

Make sure you know the interest rates you are paying on your credit cards. Then try to find a personal loan lender offering a better one. Factors like your credit score, repayment history, and any fees can each impact your annual percentage rate.

See how a personal loan might help

Your financial health is in your hands. Using a personal loan to pay off debt doesn’t protect you from getting into debt with higher-interest credit cards again. A personal loan, though, may be an important part of an overall plan for debt management—and it might help you maintain good financial health.

As you consider your options, it is important to do your research. Take a look at what you currently owe, how much you are paying each month, and how long it might take you to pay it off. Then try our debt consolidation calculator to see how much you might save in interest with a personal loan.

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Articles may contain information from third-parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.


All figures are from an online customer survey conducted September 14 to October 3, 2023. A total of 1,191 Discover personal loan customers were interviewed about their most recent Discover personal loan with 550 of them using the funds to consolidate debt. All results @ a 95% confidence level. Respondents opened their personal loan between January and July 2023 for the purpose of consolidating debt. Agree includes respondents who ‘Somewhat Agree’ and ‘Strongly Agree’.