How to Pay Off Credit Card Debt with a Personal Loan



The average American household carrying a credit card balance has over $16,000 in debt, but you sure wouldn’t know it. People talk all day long about their workouts, favorite apps, and their love lives, but bring up the subject of money, especially credit card debt, and suddenly everyone clams up.

“Money is the last taboo subject,” said SoFi Chief Operating Officer Joanne Bradford in a May episode of the Digiday podcast. “People will still not talk about it. They’re uncomfortable with talking about how much they make, how much they save, what they can do with it.”

According to the American Psychological Association’s latest “Stress In America” report, money is the number one cause of stress—ahead of work, family, and health concerns. So unless you’re expecting a windfall from a long-lost relative (who probably didn’t talk about money either), it’s up to you to come up with a game plan to manage your finances.

Committing a portion of every salary increase to paying down credit cards and personal loans is the obvious solution, but it isn’t the only option. Refinancing debt is also a smart strategy, especially for those in the post-grad plateau— the early stages of a promising career—with plenty of raises just around the corner.

With fixed-rate credit cards becoming more difficult to find, and the average annual percentage rate (APR) for variable-rate credit cards just over 16% as of this writing, you could save thousands of dollars by refinancing credit card debt with a low-interest personal loan. Fortunately, applying online usually doesn’t take more than a few minutes.

Related: How This Couple is Climbing Out of $23K in Credit Card Debt and Towards Retirement

“Most people do not like to pull into a parking lot to go and stand in line to sign some papers,” said Bradford. Her point? The easier it is for customers to consolidate debt and refinance, the more likely they’ll be to take advantage of its benefits.

There’s also the savings argument, which becomes a no-brainer once you run the numbers.

Let’s say you have a $15,000 balance on a fixed-rate credit card with a 16% APR, and your goal is to pay it off within three years. Your monthly payment would be about $527, while your total interest cost would be about $3,972—and that’s if you don’t continue to charge new credit card debt.

But if you qualify for a 7.5% APR personal loan with a three-year term, and use it to refinance your credit card debt, your monthly payment would go down by $60 and you’d save over $2,000 on total interest over the life of the loan.

High interest credit card Vs. Personal LoanOf course, everyone’s situation varies, but you can use SoFi’s personal loan payment calculator to do the math on your own personal loans.

Recommended: 5 To-Do’s Before Taking Out a Personal Loan

Need another reason to consolidate and refi credit card debt? How about five?

Here’s how a SoFi personal loan can help you pay off your credit card debt and bolster your bottom line:

1. Borrow from $5k-$100k at fixed rates that start at 5.95% APR, and variable rates that start at 4.82% (with AutoPay).

2. No origination fees or prepayment penalties.

3. Easy online personal loan application and access to live customer support seven days a week.

4. If you lose your job, SoFi will temporarily pause your payments and help you find a new job. (Note that interest accrues during the forbearance period and is added to principal when you resume repayment.)

5. End the vicious cycle of credit card debt, rather than transferring the balance to yet another credit card, which you might continue to charge up.

Armed with new information and a game plan, the next time the subject of money—specifically credit card debt—comes up, you’ll have plenty to talk about. And if you share this article with friends who want to cut up a few of their credit cards before the holiday shopping season begins, they’ll be able to join the conversation, too.

Editor’s Note: This is an updated version of a post we originally published in June 2015. We welcome new comments and questions below.


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ABOUT Dan Macklin Twitter: @macklindan Dan Macklin is a co-founder of SoFi and VP of Community & Member Success with responsibility for maximizing the overall experience for SoFi’s growing community of members. Dan holds an M.S., Management degree from the Stanford Graduate School of Business where he was a Sloan Fellow. He also holds a B.A. in Business Economics from University of Durham in England.


27 thoughts on “How to Pay Off Credit Card Debt with a Personal Loan

  1. bigtruckseriesreview says:

    REFINANCING is basically the same as “borrowing from Peter to pay Paul”, only Peter has the lower interest rate.
    REFINANCING only makes sense if you can consolidate your credit cards at a lower interest rate and then afford to pay the monthly payment’s principle and interest.

    The problem is, if you have multiple credit card debts floating around, you will end up not only paying more service charges and possible late fees (if you miss one), but it’s worse on your credit report. It’s better and more efficient to pay a single creditor.

    I had $30,000 worth of Credit card debt and student loan debt coming out of college. I consolidated all my loans – which stopped the harassing phone calls – and when I started working, I systematically attacked the debts – while ceasing credit card use to ensure I didn’t build new debts. I now live with $0 Credit Card debt, $0 student loans.

  2. I never had a credit card at all. However I can’t get one to build credit & I’m 26 I don’t know what to do. My mom ran bills up in my name when I was young. I don’t know how much I owe thats making my credit bad. I want a credit card or loan. Someone help

    • Hi Christina,

      There are lots of factors that can go into building credit, everyone’s current situation is different so it’s best to speak with a financial advisor to understand what your best next steps are. We have some other blog articles about helping to improve your financial situation such as our recent Infographic and this article.

      If you’re interested in becoming a borrower with SoFi, our Customer Service team would be happy to speak with you about your specific circumstances and to determine your eligibility. You can reach them at (855) 456-7634.

      Best of luck to you!

    • If your mom ran debt under you, were you a second person of a card? Were you under 18 you can fight that with the credit card companies i did and they were removed. My mom did it on 4 different cards.

  3. Could you helpe. I never had credit cards and or student loans. I’m trying to build credit. Or get my debt from hospital bills city bills phone bills how do I do this?

  4. What is the general credit score you look for? Also if you refinance, the credit score could improve since the utilization on cards improves and the debt coverage should be better with lower interest expense.

    • We determine eligibility by looking at your career, monthly cash flow, and financial history, so credit score is less of a consideration. We’re more interested in your future potential. To discuss your specific situation with our loan consultants, call 855-456-SOFI.

  5. This is a great idea so long as people don’t abuse it. I would like to receive more details about the process of procuring the personal loan.

  6. tanishagarg says:

    descriptive post

  7. Do you all assist with debt consolidation?

    • Hi Niki – Some of our members use personal loans for debt consolidation. Give us a call at 855-456-SOFI for more information.

  8. I have been trying to get a loan omg the things on my credit history is horrible for months on end I been trying to get a installment loan to pay at least 5,000.00 in bills and allow me to focus on paying that loan it would help my credit history the student loans were paid in 2015 I found it again on my credit report There one company at 2,0000.00 Percentage was 35% the payment would been $ 1,047.00 a month I don’t even get that I pretty much have fair credit but getting a personal loan with low income is it my fault am disabled my poor little income is only 689.00 a month really I need help but to the point taking what credit cards I do have I use that backup emergencies . And medical travels. Please consider my situation .

    • Hi Nancy – Thanks for sharing your story! You can see SoFi’s Eligibility Criteria here or give us a call at 855-456-SOFI to discuss your circumstances and see if you qualify. We wish you the best of luck!

  9. The way your information reads it doesn’t really matter about bad credit because you are here trying to help turn peoples credit around but yet you don’t.

  10. Hi – is personal loan with SoFi the same as deb consolidation with another company? Would taking a personal loan through you show that we’re consolidating our debt on our credit report which I believe has a negative impact.

    • David Gardner says:

      Hi Sophia,

      You can use a SoFi Personal Loan to consolidate debt by paying off other loans or credit cards. Your credit report reflects a variety of factors, so everyone’s situation is different. Taking out a new loan of any kind means you will have a new inquiry and loan on your report, which can hurt your credit, but if you use the loan to consolidate credit cards, you will decrease you debt-to-credit ratio on those cards, which can help your credit. The average SoFi Personal Loan borrower sees their credit score increase within 3 months of taking out a SoFi loan.

  11. I am self employed. Do you accept self employed borrowers for a personal loan to pay credit cards?

    • Hi Larry – We do! If you receive partnership, S-Corp, corporate, or rental income call us at 1-855-456-SoFi and we’ll help you with your documents.

  12. Hi, I’m not a resident or US citizen yet, I just have permit to be here and work. Could I still be eligible for a loan. Been here in the U.S. For 20 years, and expecting my residence in about six months. But I’m interested in a loan.?

  13. Golak Bhowmik says:

    This is the real life in America now.. I am worried about my future how do i continue my livelihood? Often I become optimistic life is not fair. I must fight to survive with my intelligence and community support. If I would overcome the debt I will be able to be a better position near 2020 September. So it will help me a lot reading your news letter. Thanks for your social response and courage. Looking forward for your anticipating cooperation. Golak Bhowmik

  14. I was talking to somebody already the persons name was Ganette

  15. Will you offer a personal loan just for the purpose of building credit? I pay off my credit cards monthly. I have a foreclosure about ten years ago, maybe a bit less. Otherwise, my credit is very good. It was due to a divorce and I had no choice. My job only pays me now about 400-500 per week. Employed with them just over a year.

    Interested and hoping to hear back from you.

    Laura

  16. I have low credit score mainly because of my credit use over the past year or so. I make enough to pay everything but would really like to get down to one creditor and make one payment. Having the low score prevents me from getting approved for the amount I need or the rate that would benefit me the best.

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