Is a personal loan cheaper than keeping a credit card balance?

Almost always, yes. Personal loan rates for borrowers with good credit typically range from 7% to 15% APR, while credit card APRs commonly run 20% to 29%. On a $10,000 balance paid over 3 years, a 10% personal loan costs about $1,616 in interest versus roughly $3,300 on a 22% credit card — a savings of around $1,684. The personal loan also has a fixed payoff date and fixed monthly payment, which prevents the open-ended revolving balance that traps many cardholders.

How does credit card interest work compared to a personal loan?

A credit card charges compound interest daily on the revolving balance, and your minimum payment (usually 1% to 3% of the balance plus interest) barely reduces principal — a $10,000 balance at 22% APR making minimum payments takes over 25 years to pay off and costs more than $18,000 in interest. A personal loan is an installment loan: you receive a lump sum, pay a fixed monthly amount over a set term (commonly 2 to 5 years), and the balance reaches zero on a known date. The amortization is front-loaded on interest but guaranteed to end.

Will a personal loan hurt my credit score?

There is a short-term dip when you apply because the lender performs a hard inquiry and the new account lowers your average account age. However, a personal loan often improves your credit mix (installment plus revolving), and paying it down on time builds positive payment history. More importantly, using a personal loan to pay off credit cards lowers your credit utilization ratio — a major scoring factor — which can raise your score within a few months. Avoid running the card balances back up after consolidating.

What is a debt-to-income ratio and why does it matter here?

Your debt-to-income (DTI) ratio is your total monthly debt payments divided by your gross monthly income. Personal loan lenders typically want a DTI below 36% to 40%, though some allow up to 50%. If your credit card minimums already push your DTI high, a personal loan can still lower it because the installment payment is often smaller than the sum of your card minimums. The calculator shows the monthly payment for each scenario so you can see the DTI impact directly.

What if my credit card has a 0% introductory APR?

A 0% intro APR card can beat a personal loan if you can pay the full balance before the promo period ends (commonly 12 to 21 months). But if the balance remains after the intro period, the rate jumps to the standard 20%+ APR retroactively on new interest, and many cardholders fail to clear the balance in time. A personal loan's fixed rate and term provide certainty. If you use a 0% card, divide your balance by the promo months and pay that exact amount monthly to clear it before the rate resets.

Should I close my credit cards after paying them off with a personal loan?

Usually no. Closing cards reduces your total available credit, which raises your utilization ratio and can lower your credit score. It also shortens your average account age. Keep the accounts open but unused (or put a small recurring charge on each and pay it in full) to preserve the credit limit and history. The main risk after consolidating is running up new balances on the now-zeroed cards — that leaves you with both the personal loan and new card debt, which is worse than the original problem.

Personal Loan vs Credit Card Payoff

A personal loan vs credit card payoff comparison tool is a free online tool that compares debt consolidation options. It shows interest, timeline, and total cost differences between using a personal loan and paying off credit card debt directly. Free, no sign-up required.

Debt Consolidation Inputs

Debt Amount?The total amount of debt you want to pay off.

Credit Card APR?Enter your credit card apr.

Credit Card Monthly Payment?Enter your credit card monthly payment.

Personal Loan Rate?The interest rate on a personal loan.

Personal Loan Term?The length of the personal loan.

End of inputs

Personal Loan vs Credit Card

Metric	Personal Loan Consolidate at 10.00% over 3 years	Credit Card (Status Quo) Pay $300.00/mo at 22.00% APR
Monthly Payment	$322.67	$300.00
Total Interest	$1,616.12	$5,596.10
Payoff Time	36 mo (3 yr)	52 mo (5 yr)
Total Cost	$11,616.12	$15,596.10

$3,979.98 total cost difference. The personal loan saves $3,979.98 in interest.

Key Insights

A personal loan at 10.00% over 3 years costs $322.67/mo with $1,616.12 in total interest.

Keeping the credit card at 22.00% and paying $300.00/mo takes 52 months and costs $5,596.10 in interest.

The personal loan saves $3,979.98 in interest and pays off 16 months faster.

Guide

How to Use This Calculator

1Enter the total debt amount you want to pay off — the sum of your current credit card balances, or the amount you would borrow via a personal loan to consolidate them.
2Set the credit card APR (the annual interest rate on your cards, typically 18% to 29%). Check your statement for the exact rate.
3Set the monthly payment you currently make (or plan to make) on the credit card. The calculator uses this fixed payment to simulate payoff.
4Enter the personal loan interest rate from a lender quote. Personal loan rates for good-credit borrowers typically range from 7% to 15%.
5Set the personal loan term in years (commonly 2 to 5 years). The loan amortizes fully over this term.
6Review the side-by-side metrics: monthly payment, total interest, payoff time, and total cost for each scenario. The winner banner shows which option costs less overall.
7Read the AI Insight panel for a personalized interpretation of the interest savings, payoff acceleration, and consolidation trade-offs.

Formula

How It's Calculated

PERSONAL LOAN SCENARIO uses the standard amortizing-loan payment:

M = P × [r(1+r)^n] / [(1+r)^n − 1]

Where:
- P = debtAmount (the loan principal)
- r = monthly rate = personalLoanRate ÷ 12
- n = personalLoanTermYears × 12

  monthlyPayment = M
  totalCost      = monthlyPayment × n
  totalInterest  = totalCost − debtAmount
  payoffTime     = n months

CREDIT CARD SCENARIO simulates month-by-month payoff with a fixed payment:
  monthlyRate    = creditCardApr ÷ 12
  each month:
    interest   = balance × monthlyRate
    principal  = monthlyPayment − interest
    balance    = balance − principal
  (if monthlyPayment ≤ first month's interest, balance never decreases
   → payoff time is infinity; the calculator reports this case)

  monthlyPayment = creditCardMonthlyPayment   (your input)
  totalCost      = sum of all payments until balance = 0
  totalInterest  = totalCost − debtAmount
  payoffTime     = months until balance = 0

WINNER: the scenario with the lower totalCost.

Example — $10,000 debt:
  Personal Loan: 10% APR, 3-year term → monthly $322.67,
    total interest $1,616, payoff 36 months, total cost $11,616
  Credit Card: 22% APR, $300/mo → monthly $300.00,
    total interest $3,872, payoff 60 months, total cost $13,872

The personal loan saves $2,256 in interest and pays off 2 years faster,
even though its monthly payment is $22.67 higher. The credit card's
$300 payment barely covers interest early on, stretching the payoff.

Glossary

Key Terms

FAQ

Frequently Asked Questions

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