Is a Personal Loan to Pay Off Credit Cards Worth It? Real Math

A personal loan to pay off credit cards is often worth it if the loan's APR, including fees, is clearly lower than your card's rate and you stop adding new charges. In our example, moving $12,000 from a 22% card to a 36-month loan at 12.55% with a 5% fee saves about $2,350 and gets you debt-free 8 months sooner. Try your own numbers in our personal loan calculator.

The fee matters more than most people expect. Here's the full comparison.

The setup: $12,000 at 22%

Say you owe $12,000 on credit cards at 22% APR. That's close to the 22.15% average the Federal Reserve reports for accounts paying interest. You pay $400 a month.

Your other option is a 36-month personal loan at 12.55%, roughly the October 2026 average. The lender charges a 5% origination fee, taken out of the loan amount.

Option 1: Keep paying the card

At $400 a month and 22% APR, here's what happens:

• Months to pay off: 44 (about 3 years, 8 months)
• Total interest: about $5,581
• Total paid: about $17,581

In month one, $220 of your $400 goes to interest. Only $180 reduces your balance. That ratio improves slowly as the balance shrinks.

Option 2: A personal loan with a 5% fee

Because the 5% fee comes out of the loan, you need to borrow more to get $12,000 in hand.

$12,000 ÷ 0.95 = $12,631.58 borrowed

The lender keeps $631.58 as the fee and sends $12,000 to pay off your cards.

• Monthly payment (36 months at 12.55%): $422.88
• Interest over 36 months: about $2,592
• Origination fee: about $632
• Total cost of borrowing: about $3,224
• Total paid: about $15,224

The fee raises your effective APR. Including the fee, this loan's APR is about 16.2%, not 12.55%. That's still well below 22%.

Side by side

	Credit card	Personal loan (5% fee)	Personal loan (no fee)
Amount owed at start	$12,000	$12,632	$12,000
Rate / APR	22% / 22%	12.55% / about 16.2%	12.55% / 12.55%
Monthly payment	$400	$422.88	$401.73
Months to pay off	44	36	36
Interest + fees	$5,581	$3,224	$2,462
Total paid	$17,581	$15,224	$14,462
Savings vs. card	—	about $2,357	about $3,119

The loan saves about $2,357 and 8 months, even with the fee. A no-fee loan at the same rate would save about $3,119. Shop for low-fee lenders.

What about paying the card harder?

Part of the loan's advantage comes from the slightly higher payment. If you paid your card $422.88 a month instead of $400, you'd finish in 41 months and pay about $5,097 in interest.

That's still roughly $1,870 more than the loan. The lower rate does most of the work.

What if you keep paying $400 on the loan?

Most personal loans let you prepay without a penalty. If your budget only allows $400, check whether the lender offers a longer term. A longer term lowers the payment but adds interest, so compare total cost, not just the monthly figure.

How the origination fee changes the math

Fees vary widely, often from 0% to 8% or more, depending on the lender and your credit. Here's the same $12,000 payoff at 12.55% for 36 months with different fees. The amount borrowed rises so you still get $12,000 in hand.

Origination fee	Amount borrowed	Monthly payment	APR with fee	Savings vs. card
0%	$12,000	$401.73	12.6%	about $3,119
3%	$12,371	$414.16	14.7%	about $2,671
5%	$12,632	$422.88	16.2%	about $2,357
8%	$13,043	$436.66	18.5%	about $1,861

Even at 8%, the loan still beats the card here. But the savings shrink fast. A higher fee paired with a higher rate could wipe them out entirely.

When consolidation is worth it

A personal loan often makes sense when:

• The APR, including fees, is meaningfully lower than your card rates. A few points of difference may not cover the fee.
• You can afford the fixed payment. Missing payments brings late fees and credit damage.
• You'll stop using the cards. This is the big one. If balances creep back, you'll have the loan and new card debt.
• You want a clear end date. A 36-month loan ends in 36 months. Minimum card payments can stretch for years.

When it may not be worth it

Consolidation may not help if:

• Your credit limits the rate. If you're offered 20% or more with a fee, the savings may disappear.
• The fee is high and the debt is small. A $300 fee on a $3,000 balance you'd clear in a year may cost more than it saves.
• You can pay it off fast anyway. If you can clear the cards in a few months, a loan adds little.
• A 0% balance transfer fits. A 0% intro APR card with a 3% to 5% transfer fee can beat a loan if you repay before the promo ends.

How to compare loan offers

1. Prequalify with several lenders. Many use a soft credit check, which doesn't affect your score.
2. Compare APRs, not rates. The APR includes the origination fee. The Consumer Financial Protection Bureau explains the difference at consumerfinance.gov.
3. Check how the fee is charged. Deducted from proceeds means you need to borrow more.
4. Ask about prepayment penalties. Most personal loans don't have them, but confirm.
5. Pick the shortest term you can afford. Shorter terms usually mean lower total interest.

A plan to make it stick

Getting the loan is the easy part. These steps help keep the debt from coming back:

• Pay the cards off directly through the lender if it offers that option.
• Keep the card accounts open if there's no annual fee. Closing them can raise your utilization.
• Remove saved card numbers from shopping sites.
• Build a small emergency fund so a car repair doesn't land on a card.

Other ways to pay down card debt

If a loan isn't a good fit, you still have options. The debt avalanche pays your highest-rate balance first. The debt snowball starts with the smallest balance for quick wins. Compare both with our debt snowball vs. avalanche calculator, or see your payoff date at different payments with the credit card payoff calculator.

To check whether a specific loan offer saves you money, enter the amount, rate, term and fee in our personal loan calculator. It shows the true APR and your total cost side by side.