BACK

Cashing In Q&A columns

Paying credit card minimums with a personal loan

Summary

Stuck with hard to pay credit card debt? Learn about the possibility of a personal loan.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

While it is always best for consumers to pay off their entire credit card balance each month in order to avoid interest charges and penalties, that is not always possible.  Sometimes more pressing expenses, such as rent, utility bills and gas costs, come first.

In the long run, tackling credit card debt will save consumers money.  Although consumers should be open to a variety of strategies for eliminating credit card debt, some experts recommend unsecured personal loans as a way to wipe out credit card balances.

Unsecured personal loans enable the consumer to replace their minimum and variable credit card payments with fixed loan installments.  In fact, credit cards have in some ways taken the place of what consumers used to take out a personal loan for.

With revolving credit card balances, falling into a vicious cycle of debt is all too common.  When only the minimum amount is paid off each month, credit card debt is allowed to grow.  If the consumer can’t make these minimum payments, they can expect to get hit with penalty fees that will add to their debt further.  Additionally, the credit card issuer will punish payment delinquency by hiking the card’s APR.  From that point, debt expands.

Unsecured personal loans can be taken out at credit unions.  Experts who recommend getting unsecured personal loans to combat credit card balances trumpet their ease of approval, which can take as little as 10 minutes by phone.  Approval may depend on if the consumer has reliably paid secured and unsecured debt in the past, in addition to their debt-to-income ratio, their amount of unsecured debt, and if they earn a steady income.

Depending on the consumer’s credit history, collateral may be needed.  Once approved for an unsecured personal loan, the consumer can take care of their credit card balance in full.

Unsecured personal loan installments have a number of advantages over regular credit card payments.  To start with, the interest rate on unsecured personal loans is substantially lower than the APR on unpaid credit card balances, particularly if the credit card’s into rate has expired.  While credit card interest rates often range from 14 percent to as high as 25 percent, the interest rates on unsecured loans fall between 7 percent and 16 percent.  The best low interest credit cards offer lower APRs than standard credit cards, however.

Also, while credit cards carry minimum payments that are variable and include little principal, an unsecured personal loan’s monthly payments can carry fixed rates, keeping them constant throughout the entire life of the loan.  And, since the monthly payments on an unsecured personal loan also include interest and principal, the consumer will be continuously trimming their debt by repaying the loan.

If, after paying off their credit card balances, a consumer keeps from overspending on their credit cards, their unsecured loan installments will also help end the vicious cycle and begin a positive move toward overcoming credit card debt.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Cashing In Q&A columns

Report: Credit card fee disclosures have become overly complex

A new study finds credit card fee disclosures have weaknesses in communicating terms to cardholders.

See more stories
Credit Card Rate Report Updated: September 23rd, 2020
Business
13.91%
Airline
15.48%
Cash Back
15.94%
Reward
15.78%
Student
16.12%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.