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The Pros and Cons to Paying Off Credit Cards with a Personal Loan

There are several factors to consider before obtaining a personal loan to pay off credit cards. To qualify for the best personal loan rates, you will need a high credit score, and time to research. It is best to thoroughly search around the internet to spot any promotional rates being offered. Consolidating multiple credit cards into one loan simplifies paying off your debt by forming a definitive timeline and consistent payment amount to meet your debt free goal. Personal loans are typically simple and quick and involve no fees. There are pros and cons to any type of financial decision, and consolidating from credit cards to personal loan is no different.


  • One monthly loan payment
  • Reduction of interest rate
  • Set term and payment
  • No fees absorbing your savings


  • Monthly payment increase is possible for higher balances
  • Higher interest rate than some other types of loan options
  • Payoff eliminates balance on your card allowing for additional charging

Once you gather all of your monthly credit card bills, calculate all of the balances. Then, calculate and aggregate all of your minimum monthly payment amounts. Finally, simply calculate your proposed monthly payment for the personal loan. You can now see the comparison of monthly payments now versus if you consolidate. The consolidation’s monthly payment, interest rate, or interest paid over the life of the loan should be lower.

Are you willing to close your credit cards? This could have slight adverse credit score consequences, but in the end if you need to in order to not reuse, or it is mandated by the creditor to approve your loan, then it is worth it. Just keep one or two for emergency use only and use them for a small purchase periodically to keep them active.

Do you have other items of value that can be used as collateral, such as a paid in full car, cash savings, 401(k), or equity in your home? These may be better options depending on the amount of outstanding debt you need to consolidate, interest rates being offered, and the monthly payment you can afford, or would like to pay. Many of these have lower interest rates, and allow for a longer term for those consumer with very high amounts in credit card debt.

A Lafayette Federal Holiday Loan is the perfect way to finance all of your extra spending this time of year! For a limited time, we’re giving our members access to a reduced-rate loan, perfect for the hustle and bustle of the holidays. Learn more at


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