Can I use a personal loan to pay off
my credit card?

young woman avoiding credit card onlinefraud

Looking for a way to start chipping away at your credit card bills? Learn more about using a personal loan to pay off credit card debt so you can decide if it’s a good option for you.

Credit cards are a convenience many of us can’t live without. And as long as you’re paying them off regularly, they can provide a valuable financial buffer – not to mention all those points!

But if you don’t keep on top of them, your credit card debt can spiral. And while it might feel overwhelming, getting those bills back under control can help you avoid:

Credit score implications

Any outstanding debt you have – including credit card debt – will be part of the credit report lenders review when deciding if they want to offer you a loan. Getting your credit card debt under control could help you improve your credit score, and help you to achieve your financial or home ownership goals.

Increasing interest

The more debt you have, the more it could end up costing you in the long run. Credit cards accrue interest, and the higher the amount you owe, the more you’re likely to pay. Chipping away at that debt and paying it off on time can help to reduce your interest charges and slow the spiral of increasing costs.

There are plenty of reasons to pay off your credit card sooner rather than later. One potential option is to take out a personal loan to pay off your debt. But how does it work, and is it the right option for you? Let’s find out. 


What are the differences between a personal loan and credit card debt?

Before you decide if taking out a personal loan to pay off your credit card makes sense for you, it could help to understand some of the differences and similarities between personal loans and credit card debt.

Personal loans

are in general less variable in nature than credit cards. You get approved to borrow a certain amount, and you have a set date by which you must pay it back (with interest). Most personal loans have fixed interest rates, and you make the same payment each month until the loan is paid off. 

Credit cards

cards are considered revolving debt because the amount you borrow changes based on how much you buy – up to a maximum amount known as your credit limit. Your minimum monthly repayments also change depending on how much you’ve purchased in any given month. Credit card interest rates are generally variable, which can introduce even more uncertainty. 

Benefits of using a personal loan to pay off credit card debt

There are plenty of benefits to consolidating your debt, and using a personal loan may help you access those benefits. They include:

Making things easier for yourself

You’ve got plenty going on – the last thing you need is a collection of dates, payment methods, accounts and amounts to keep track of. With a personal loan, you pay one regular payment to one lender.

A clearer idea on how much interest you're paying

Most credit cards have variable interest rates, which can add to the pain of rising interest rates. Multiple credit cards can mean multiple rates, making it harder to keep track of just how much you’re paying. Consolidating into one personal loan gives you a clearer picture of how much interest you owe. 

Spending less on fees

Different credit cards can have different fees. Some might require an annual fee to keep your card open or have fees for late payments or transferring your balance between cards. A loan from a single source can help you avoid paying some of these.

Using a personal loan to pay off your credit card debt may help you get on top of what you owe. It's a good idea to speak to your current lender first to see what they can do to help.

Did you know? 

At Pepper Money, we offer no-fee~ personal loan options, for the life of the loan.

Potential drawbacks of paying credit cards with a personal loan 

While there may be some benefits to paying credit card debt with a personal loan, depending on your circumstances there may also be some drawbacks, including:

Establishment fees

Personal loans often have an establishment fee that you need to pay to get the loan up and running. Some credit cards don’t have an annual fee. This could mean you’ll pay more to access finance through a personal loan than through a credit card.

Less flexibility with payments

Unlike a credit card, a loan doesn’t have the same wiggle room when it comes to payments. With most credit cards you can opt for a minimum credit card payment instead of covering your full balance any given month. But with a personal loan, you are required to pay the full monthly instalment.

Possibility of acquiring more debt

The potential convenience of a personal loan can be a great solution when you’re figuring out how to pay off credit card debt. But it’s important to remember that you’ll still have loan repayments to make. So even when you refinance all of your credit card debt, if you still need to turn to your credit card after you take out a personal loan, you could end up acquiring more debt than you had to begin with.

How to get a personal loan to pay off credit card debt

A personal loan could give you the flexibility and convenience you need to start getting your credit card debt under control. But not all personal loans are the same, so it’s important to choose the right personal loan for you. That involves shopping around to compare loan options - see which fees, repayment terms and, of course, loan sizes fit your situation the best.

To get a personal loan for debt consolidation to pay off credit card debt, applying for a no-fee~  personal loan with Pepper Money could be an option.

Want to know more about Personal Loans?

To find out more about a Pepper Money Personal Loan or apply for an individual interest rate quote today, head to the get my rate tool or contact a Pepper Money personal loan accredited broker.

Got a question? Call us on 1300 108 794. We're here to help.


Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.

All applications are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply. 

The results of the borrowing power calculator are based on information you have provided and is to be used as a guide only. The output of the calculator is subject to the assumptions provided in the calculator (see 'about this calculator') and are subject to change. It does not constitute a quote, pre-qualification, approval for credit or an offer for credit and you should not enter commitments based on it. The interest rates do not reflect true interest rates and the formula used for the purpose of calculating estimated borrowing power is based on the assumption that interest rates remain constant for the chosen loan term. Your borrowing power amount will be different if a full application is submitted and we complete responsible lending assessment. The results in the calculator do not take into account loan setup or establishment fees nor government, statutory or lenders fees, which may be applicable from time to time. Calculator by Widgetworks.

Pepper Money Personal Loans is a brand of Pepper Money Limited. Credit is provided by Now Finance Group Pty Ltd, Australian Credit Licence Number 425142 as agent for NF Finco 2 Pty Limited ACN 164 213 030. Personal information for Pepper Money Personal Loans is collected, used and disclosed in accordance with Pepper’s Privacy Policy & the credit provider’s Privacy Policy.

Pepper Money Limited ABN 55 094 317 665; AFSL 286655; Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans.

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