Using Personal Loans to Pay Off Credit Card Debt

Key insights:

• Personal loans to pay off credit card debt can allow you to combine multiple balances into one fixed monthly payment
• A personal loan for paying off credit cards may offer a lower interest rate than your existing debt, depending on your credit profile
• Personal loans for paying off credit card debt may not make sense if the new loan costs more over time

Credit card debt can put pressure on your monthly budget, especially if you're managing multiple balances with different due dates and interest rates.

Many borrowers consider using personal loans to pay off credit cards as a way to simplify repayment. By consolidating balances into one personal loan, you may be able to streamline your payments and potentially reduce interest costs. Here's how it works.

How consolidating credit card debt with a personal loan works

When you use a personal loan for paying off credit cards, you borrow a lump sum and use those funds to pay off your existing balances. Some lenders may send the funds directly to your credit card issuers, while others deposit the money into your account for you to distribute.

If approved for a loan amount equal to or greater than your total credit card balances, you can consolidate everything into one monthly payment. If the loan amount is smaller, you may only be able to pay off part of your debt.

Many personal loans for credit card debt come with fixed interest rates and set monthly payments. That predictability can help to make budgeting easier.

Before applying, compare the loan's interest rate and term to your current credit card rates. If the loan carries a higher interest rate or a long term, you could pay more overall.

Reasons to consider personal loans to pay off credit cards

Using personal loans to pay off credit card debt may offer several advantages, depending on your situation.

A single monthly payment

Instead of juggling multiple cards and due dates, you'll make one consistent monthly payment. That simplicity can help you stay organized.

Potential interest savings

If you qualify for a lower rate than what you're currently paying on your credit cards, a personal loan for paying off credit cards may reduce the total interest you pay over time.

Keep in mind that a long loan term could increase the total interest you pay, even with a lower rate.

Structured repayment timeline

Unlike credit cards, which allow revolving balances, personal loans have set repayment periods. That structure may help you focus on becoming debt-free within a defined timeframe.

When personal loans for paying off credit card debt may not make sense

While using a personal loan for paying off credit card debt can be helpful, it isn't always the right solution.

The payments exceed your budget

Taking on a new loan won't help if the monthly payment is unaffordable. Even one missed payment can negatively impact your credit score.

You won’t save money

If the interest rate is higher than your current credit card rates — or if fees and a long term increase total repayment costs — consolidation may not benefit you.

Spending habits remain unchanged

Personal loans to pay off credit cards work best when paired with a plan to avoid accumulating new balances. Continuing to use credit cards without a repayment strategy could lead to more debt.

Alternatives to personal loans to pay off credit card debt

If a personal loan doesn't fit your needs, other options may help.

Balance transfer credit card

A balance transfer card may offer a low introductory APR for a limited time. Paying off most or all of your balance during the promotional period could reduce interest costs.

Debt payoff strategies

Structured repayment approaches can also be effective:

• Debt snowball: Pay off the smallest balance first for quick wins
• Debt avalanche: Focus on the highest-interest balance to reduce total interest

Both strategies can help you manage credit card debt without opening a new loan.

Deciding if a personal loan for paying off credit cards is right for you

Choosing between personal loans to pay off credit card debt and other repayment strategies depends on your credit profile, interest rates and monthly budget.

Compare loan offers carefully. Review the interest rate, term length and any fees. Calculate the total repayment cost, not just the monthly payment.

If a personal loan for paying off credit cards helps you lower your interest rate, simplify payments and stay within budget, consolidation may support your financial goals. If not, exploring alternatives could be the better path forward.

Citi offers personal loans to eligible new and existing customers who meet credit and income requirements. If you believe a Citi Personal Loan may help you manage your credit card balances, you can review your options and apply online.

This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.