woman sitting next to plant, smiling holding phone and credit card
April 5, 2021

Benefits of Paying Off Your Credit Card Debt with a Personal Loan

While using a personal loan for credit card debt is only one option, it does offer several benefits.

Easy online applications

Many personal loan lenders offer quick loan online applications, and you can often get prequalified and review your offers with only a soft credit check—the type that doesn’t hurt your credit score.

In contrast, you won’t know your credit limit or if you’re approved for a balance transfer card or new credit card until after you submit an application and agree to a hard inquiry, which can cause a dip in your credit score.

Fixed interest rates and repayment periods

Personal loans often have a fixed interest rate, and you may be able to pick your repayment period before accepting a loan. In most cases, personal loan interest rates are lower than credit card interest rates, which can save you money and lead to paying down debt sooner. Plus, you can type: entry-hyperlink id: 53SYqBAp1rY9UizyYpG6dV, knowing that the monthly payment will never change.

Lower monthly payments

If you have multiple credit cards, the combined minimum payments could wind up being a major monthly expense. However, a personal loan can also function as a debt consolidation loan, and you can use the funds to pay off multiple credit card accounts. Depending on the interest rate and repayment term, you could wind up with a lower monthly payment, which will free up money in your budget for other expenses.

Improved credit scores

Your credit card’s balance relative to its credit limit can be an important factor in determining your credit scores, and the lower your credit utilization rate the better. While your outstanding debt on a loan is also a scoring factor, it’s generally not as important as the revolving credit utilization rate. As a result, paying down credit card balances with a personal loan could improve your credit score.

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Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.

A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,854 for a term of 36 months, with an interest rate of 10.29% and a 6.00% origination fee of $1,191, for an APR of 14.60%. In this example, the borrower will receive $18,663 and will make 36 monthly payments of $643. Loan amounts range from $1,000 to $40,000 and loan term lengths range from 24 months to 60 months. Some amounts, rates, and term lengths may be unavailable in certain states. 

For Personal Loans, APR ranges from 9.57% to 35.99% and origination fee ranges from 3.00% to 8.00% of the loan amount. APRs and origination fees are determined at the time of application. Lowest APR is available to borrowers with excellent credit. Advertised rates and fees are valid as of July 11, 2023 and are subject to change without notice. 

Checking a rate through us generates a soft credit inquiry on a person’s credit report, which is visible only to that person. A hard credit inquiry, which is visible to that person and others, and which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person. Credit eligibility is not guaranteed. APR and other credit terms depend upon credit score and other key financing characteristics, including but not limited to the amount financed, loan term length, and credit usage and history.  

Unless otherwise specified, all credit and deposit products are provided by LendingClub Bank, N.A., Member FDIC, Equal Housing Lender (“LendingClub Bank”), a wholly-owned subsidiary of LendingClub Corporation, NMLS ID 167439. Credit products are subject to credit approval and may be subject to sufficient investor commitment. ​Deposit accounts are subject to approval. Only deposit products are FDIC insured.

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