Credit Cards
April 14, 2022

3 reasons to use personal loans to pay off debt

Using a personal loan can clear your cards and make more credit available. But be careful how you use it.

Trying to get out of debt is a lot like trying to dig your way out of a hole. Digging is what created the hole and continuing to dig is only going to make that hole deeper and harder to get out of. 

You simply can not dig your way out of a hole. So, stop digging, reassess, and figure out a more efficient way.

Debt is the same way. Spending is what created the debt and continuing to spend unwisely is making your debt even bigger and harder to get out of. You either drown in accumulating more debt or you are buried alive by large monthly payments plus the high interest rates. 

To get out of debt, minimize spending, reassess your financial situation and find a solid method for getting out of debt.

It may seem illogical, but taking out more debt – a personal loan – can be the best way to pay off credit card debt. Let’s look at a few reasons why and maybe even find a solid method in this madness.

What is a personal loan?

A personal loan is money you borrow to cover personal expenses such as a wedding, emergencies, home renovations, and yes, to consolidate debt. These loans are offered by online lenders, credit unions and banks. 

With most personal loans, you’ll receive a lump sum up front, which you’ll use to pay off your credit cards. You’ll then pay back the loan over a set period of time, usually in fixed, predictable monthly payments. 

You’ll also pay interest, but for most personal loans, the rates are lower than what you’re paying on your credit cards. So your monthly payment, including your interest charges, should be lower than what you’re paying on your credit cards. 

Given the length of many personal loans, you may end up paying more in interest over the long term, but it’s a trade off. Lower monthly loan payments every month can give much needed relief.

Some personal loans require you to have collateral. These loans are known as secured loans. Loans where no collateral is needed are known as unsecured loans.

When should you use a personal loan to pay off debt?

Use a personal loan if your monthly card payments are too high, juggling due dates have become overwhelming or your interest charges have grown too big. 

Using a personal loan can also clear your cards and make more credit available. But be careful how you use it: don’t fall into old spending habits and drive your card debt back up. 

For some, a personal loan is the most efficient way to pay off card debt. The process is often simple, straightforward and cost-efficient.

3 reasons to use a personal loan to pay off debt

1. Simplify with one monthly payment.

When you use a loan to pay off multiple loans or credit cards, you’re simplifying your monthly payments, streamlining into one loan repayment. You have only one payment and one due date to keep up with instead of multiple ones.

2. Lower your interest rate.

Interest rates are typically much lower on personal loans than they are on credit cards. This can save quite a bit over the long term. 

3. Know when you’ll be debt free.

By consolidating all debt with a personal loan, you’ll have an established repayment plan, usually with fixed payments every month, and a timeline for when you’ll pay off the loan. In other words, you’ll know the exact date when you’ll be debt free, which can help you plan for the future.

When not to use a personal loan to pay off card debt

1. You’re unable to make the loan payments.

If you’re on a tight monthly budget, a personal loan may not be practical. You may not be able to make the monthly payment from a consolidated loan (in contrast to making only the minimum due on multiple cards).

2. You keep adding more credit card debt.

Remember that hole? You don’t want to keep digging a bigger hole and accumulating more debt. It will take even more time and money to pay off the additional debt. The goal of the personal loan is to pay off a set amount of debt in a specified time period. To do that, you’ll also need to curtail spending so you don’t end up with a personal loan plus new, additional credit card debt.

3. Your debt is too small.

If you have a relatively small amount of debt that can be paid off in 12 to 21 months, consider a balance transfer credit card instead. You can often get 0% APR on balance transfers for up to 21 months. Even with a transfer fee of 3 to 5 percent, you can still save money on interest, if you pay down your debt during the 21 months. You may even receive some perks or rewards for transferring the balance.


Many people fall behind on their credit card debt and need a personal loan with fixed, predictable payments at a lower interest rate. Once a loan is secured, reassess your financial situation and minimize spending. With the relief of a personal loan, plus some financial discipline, you may be on the path to living debt-free.

Use Bright to pay off credit card debts

Bright does not offer personal loans. But we can help pay off your card debts faster.

If you don’t have it yet, download the Bright app from the App Store or Google Play. Connect your checking account and your cards, set a few goals and let Bright do the rest.

Recommended Reading:

Personal loans: Everything you need to know

Personal loans vs. Credit cards: What's better?

Caryl Ramsey
Content Writer
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