# Why You Should Use a Personal Loan to Pay Down Debt
The average American carrying credit card debt holds a balance around $6,354. Credit cards charge interest rates averaging 16% to 21% annually, making debt repayment slow and expensive. Personal loans offer a faster path out.
Personal loans typically carry lower interest rates than credit cards. Most banks and online lenders offer rates between 6% and 36%, depending on creditworthiness. Someone with fair to good credit often qualifies for rates under 12%. This difference matters. On a $6,000 balance at 18% interest, monthly payments of $200 take roughly 34 months to clear. The same amount at 10% interest takes 31 months but costs hundreds less in total interest.
The strategy works best when you consolidate high-interest credit card balances into a single personal loan with a fixed rate and set repayment term. You know exactly when you'll be debt-free. No variable rates. No temptation to charge more after paying balances down.
Personal loans also simplify payments. Instead of juggling multiple credit card due dates, you make one monthly payment to one lender. This reduces missed payments and late fees that spike credit card balances faster.
The catch: a personal loan only works if you stop using credit cards simultaneously. If you pay off cards with a personal loan, then immediately rack up new credit card debt, you've worsened your situation. You now owe both the personal loan and fresh credit card balances.
Your credit score may dip slightly when you first apply for a personal loan. Multiple applications within weeks can hurt your score. But as you pay down the personal loan on schedule, your score typically recovers and improves. Installment loans (like personal loans) boost credit scores when paid reliably.
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