# Personal Loans as a Debt Payoff Tool
The average American carrying credit card debt holds a balance of roughly $6,354. That debt comes with a serious cost. Credit cards typically charge interest rates between 15% and 25%, which means your balance grows faster than most people can pay it down.
A personal loan offers a concrete alternative. Personal loans generally charge lower interest rates than credit cards, typically ranging from 6% to 36% depending on your credit score and the lender. Borrowers with strong credit can secure rates closer to 6%, while those with fair credit might see rates in the mid-teens.
Here's how the math works. Take that $6,354 balance at 20% annual interest. You pay $127 per month just in interest before touching principal. Switch to a personal loan at 12% interest, and your interest cost drops significantly on the same balance. Over time, that difference compounds into real savings.
Personal loans also impose a fixed repayment timeline, typically three to five years. Credit cards let you carry balances indefinitely, making it easy to stay in debt. A personal loan forces discipline through scheduled payments and an end date.
The strategy works best when you address the underlying problem. Consolidating credit card debt into a personal loan only works if you stop accumulating new credit card balances. If you pay off cards with a personal loan, then immediately rebuild the credit card debt, you've simply added another monthly payment without solving anything.
Shopping around matters enormously. LendingClub, Upstart, SoFi, and traditional banks like Wells Fargo and Chase all offer personal loans. Rates vary by lender. Check your current credit score before applying. Multiple inquiries within two weeks count as one pull, so time your applications strategically.
Personal loans work best for people with decent credit who need a structured