When a personal loan actually beats a credit card
Consolidation math works when the personal loan APR (including origination) is meaningfully below your current revolving rate AND you commit to closing/freezing the cards. The risk: many people consolidate, then run the cards back up — now they have both the loan AND the new card debt.
- • Worth it: 10–17% personal loan paying off 22–28% credit cards.
- • Not worth it: 18%+ personal loan when you could do a 0% balance transfer for 18 months (3% fee).
- • Never worth it: borrowing to invest, gamble, or pay for a vacation.
Why the headline rate isn't the real cost
Origination fees of 3–8% are deducted from the cash you receive but charged on the full loan principal. A '12% APR' personal loan with a 6% origination fee on a 3-year term actually costs about 16% APR. Always compare lenders by true APR after fees, not headline rate — and watch for prepayment penalties (rare but exist).
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
FAQ
How is a personal loan payment calculated?
Standard amortization: Payment = P × [r(1+r)^n] / [(1+r)^n − 1]. r is monthly rate (APR/12), n is total months. Each payment is fixed; interest portion declines, principal portion grows. Online calculators (this one) handle the math.
What credit score do I need for a personal loan?
580+ for most lenders, 660+ for competitive rates, 720+ for the best rates. Below 580 you're looking at fintech 'second-chance' lenders at 28–36% APR — usually worse than 0% balance transfer cards.
Are personal loans better than credit cards?
For paying off existing high-rate revolving debt: usually yes if your credit qualifies for a lower personal loan rate. For new spending: usually no — credit cards have grace periods, rewards, and chargeback protection that loans don't.
Do personal loans hurt your credit score?
Short term: small dip (5–10 points) from the hard inquiry and new account. Long term: typically helps — it adds installment-loan mix to your credit file and lowers credit utilization if used to pay off cards. Late payments are what actually hurt.
What's the difference between APR and interest rate on a personal loan?
Interest rate is the cost of the principal only. APR includes origination fee and other mandatory fees amortized over the loan term — it's the true all-in annual cost. Always compare APR, not rate.
How this calculator is built
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Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
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Last reviewed
June 2026. We re-check every figure on the platform on a rolling quarterly cycle.
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See our editorial policy and disclaimer. Results are estimates, not advice.