Personal Loan vs. Credit Card Debt: Which Is Cheaper to Carry?

If you're carrying a credit card balance at 20–29% APR, a personal loan at 10–15% looks attractive. Using a fixed-rate personal loan to pay off revolving credit card debt — sometimes called debt consolidation — can genuinely reduce your interest costs and give you a clear payoff date. But it's not the right move for everyone.

Key differences

• Credit cards: variable APR, revolving balance, no fixed end date
• Personal loans: fixed rate, fixed monthly payment, fixed payoff date
• Credit cards: interest accrues daily on the balance carried
• Personal loans: simple interest amortized over the loan term
• Personal loans: may have origination fees (1–8% of loan amount)

When a personal loan wins

A personal loan makes financial sense when the interest rate is meaningfully lower than your current credit card APR — ideally by at least 4–5 percentage points. It also helps if you have the discipline to stop using the credit cards after paying them off. The most common debt consolidation failure is paying off cards with a loan and then running the cards back up, leaving you with both the loan payment and new card balances.

When it doesn't make sense

• The personal loan rate isn't significantly lower than your card rates
• The origination fee erases the interest savings
• You have excellent credit and can qualify for a 0% balance transfer card instead
• You're close to paying off the cards anyway
• You've consolidated debt before and the balances returned

The balance transfer alternative

If you have good credit (generally 680+), a 0% APR balance transfer card is often cheaper than a personal loan for balances you can pay off within 12–21 months. Transfer fees are typically 3–5%, but if you eliminate the balance during the promotional period, you pay zero interest — which beats any personal loan rate. The risk is that any remaining balance at the end of the promotional period reverts to a high regular APR.

Run the numbers first

The best way to evaluate your options is to calculate the total cost of each path — current credit card trajectory, personal loan payoff, and balance transfer — and compare them directly. Our calculators let you do exactly that.