How to Pay Off Credit Card Debt with a Personal Loan

The average credit card debt of U.S. households is $5,700 , 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.

According to the most recent American Psychological Association “Stress In America” report , money is the number two cause of stress (62%)—right behind the future of our nation (63%) and ahead of work, current political climate, and violence and crime. Many people spend their days worrying about money and try to figure out how to come up with the right debt repayment plan.

Creating a Credit Card Payoff Gameplan

There are many different strategies you can try to help pay off your credit card debt. From the snowball method (paying off your debt from smallest to largest) to utilizing a balance transfer credit card (transferring all of your credit card debt to a new credit card that has a 0% interest rate APY introductory offer), there is no one right solution to becoming debt free.

Before you create a plan of action to demolish your debt, however, it may be a good idea to get all of your finances in order.

By taking a holistic view of your finances (understanding how much debt you have in total, what your monthly expenses are, and your take home income), it may help you to understand where you need to cut back. After understanding your financial picture, the next step that can help get you on track is to create a budget.

This doesn’t have to mean cutting back on all of the things you love. But, you may want to cut back somewhere. It could be as easy as cooking at home instead of going out to eat, or only shopping for new shoes once a quarter instead of every month. Many people use budgets as a way to see what expenses can be reduced each month to free up money to put towards debt.

Then, you can decide on which debt reduction strategy to try. Are you going to attempt the avalanche method of paying off debt? Or what about consolidating your credit card debt into a low-rate personal loan? If you want to learn more about debt consolidation options, keep reading.

Using a Personal Loan to Pay off Credit Cards

One strategy to help you pay off your credit card debt is to consolidate and refinance your debt with a personal loan. With fixed-rate credit cards becoming more difficult to find, and the average annual percentage rate (APR) for variable-rate credit cards over 17% as of this writing, consolidating your credit card debt with a credit card consolidation loan could help you pay down your debt.

How would that work? In many cases, personal loans have lower interest rates than credit cards, which would help you save money on interest over the life of your debt.

Let’s say you have a $15,000 balance on a fixed-rate credit card with a 16% APR with a monthly payment of $527. You could be able to pay off your credit card debt in three years, but over that time you would pay $3,988 in credit card interest alone (in addition to your credit card balance), and that’s if you don’t continue to charge new credit card debt.

You can use our Credit Card Interest Calculator to get an idea of how much interest you could be paying on your personal credit card debt. You can also use our personal loan calculator to do the math on your own debt and to see what personal loan rate you may qualify for.

Another benefit of consolidating your credit card debt with a personal loan is that you don’t need to decide which card to pay off first, you simply pay off all of your debt at once. Then you have one payment each month to pay off your personal loan.

If you qualify for a personal loan to consolidate your credit card debt, you are taking out a brand new loan with a new interest rate and monthly payment to pay your full credit card balances. Then, you will just have one monthly payment to worry about instead of many different payments on different credit cards each month.

While using a personal loan to consolidate your debt has many upsides, there are a few things to note. A shorter loan term could mean higher monthly payments. Additionally, if your personal loan term is long, you could be paying more in interest over the life of the loan.

Personal Loans with SoFi

If you have decided that consolidating your credit card debt with a personal loan is the right strategy for you, you could check out personal loans with SoFi.

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

1. Borrow from at rates typically lower than credit card interest rates. (View payment examples right here.)

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 through no fault of your own, you may qualify for unemployment protection where 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. Learn more here.)

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 debt reduction 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, they’ll be able to join the conversation, too.

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