Credit Card Debt

Can You Get a Loan to Pay Off Credit Card Debt?

Credit card debt can quickly accumulate, and high-interest rates can make it challenging to make a dent in your balances. Taking out a loan to pay off credit card debt is an option that could help you manage it and pay it off more quickly.
Bruce Hodges
March 29, 2024
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Table of Contents

Can You Get A Loan To Pay Off Credit Card Debt?

If you're struggling with credit card debt, you may be wondering if getting a loan is a viable option to help pay it off. Credit card debt can quickly accumulate, and high-interest rates can make it challenging to make a dent in your balances. Taking out a loan to pay off credit card debt is possible, but may not always be the right solution.

In this blog, we'll explore the basics of debt consolidation and how it can help you pay off credit card debt. We'll also dive into the pros and cons of using a personal loan for credit card debt consolidation, as well as alternative options you can consider. By understanding the options available to you, you'll be able to make an informed financial decision and find the best solution for your unique situation.

Key Highlights

  • Debt consolidation with a personal loan could help you pay off credit card debt faster, if it has a lower interest rate.
  • Consolidating your credit card debt into a personal loan could simplify your finances by combining multiple payments into one fixed monthly payment.
  • Using a personal loan for debt consolidation can potentially improve your credit score in the long run, if it helps you make payments more consistently.
  • It's important to assess your financial situation and compare loan offers before applying for a loan.
  • There are alternatives to loans for paying off credit card debt, such as balance transfer cards and debt management plans.

What Is Debt Consolidation?

The concept of getting a loan to pay off credit card debt is essentially debt consolidation.

Debt consolidation is a strategy that allows you to combine multiple debts into a single loan. This can include credit card debt, personal loans, or other types of debt. The main goal of debt consolidation is to simplify your finances by reducing the number of monthly payments you need to make and potentially lowering your overall interest rate.

When it comes to credit card debt, debt consolidation can be a particularly effective tool. Credit cards often come with high-interest rates, making it extremely challenging to pay off the balance while keeping up with interest charges. By consolidating your credit card debt with a lower interest rate loan, you can save money on interest and pay off your debt more efficiently.

However, it's always important to compare your credit card's interest rates with a debt consolidation loan's interest rates, time period, and potential fees to ensure it's the right decision.

Personal Loans for Credit Card Debt Repayment

Personal loans are a popular type of loan for debt consolidation, including the repayment of credit card debt. These loans can be obtained from banks, credit unions, or online lenders like Parachute. The main advantages of a personal loan are the potential for a lower interest rate compared to credit cards and the ability to manage your monthly payments in a way that promotes creditworthiness .

If you're able to consolidate higher-interest debt into one lower-interest payment, you could immediately free up some cash flow and simplify your finances. Personal loans typically come with fixed interest rates, which also means your monthly payment will remain the same throughout the loan term. This can help you create a repayment plan and budget more effectively.

To see if Parachute could be the right choice for a debt consolidation loan up to $25,000, click here.

Pros of Using Personal Loans

Using a personal loan to pay off credit card debt comes with several potential benefits:

  • Eliminate over limit fees
  • Eliminate or reduce balance protection fees (% of balance outstanding)
  • Eliminate annual fees by closing cards that charge an annual fee
  • Avoid interest rate increases (some credit cards may be increasing your rates after 2 instances of missed payments!)
  • You can consolidate multiple payments into one simple payment, which you can match to your payroll dates
  • Knowing when your debt will be paid off due to a simple, disciplined payment schedule

When consolidating with Parachute, you also get access to a platform that will help you rebuild your financial well-being, stay on track each month, and earn cash-back rewards for doing it.

Cons of Using Personal Loans

While personal loans can be a valuable tool for debt consolidation, there are also potential drawbacks to consider:

  • Origination Fee: Some lenders may charge an origination fee for processing your personal loan. This fee is typically a percentage of the loan amount and can add to the overall cost of borrowing. Parachute does not charge an origination fee. 
  • Higher Interest Rates for Some Borrowers: While personal loans generally have lower interest rates than credit cards, the specific rate you qualify for will depend on factors such as your credit score and financial history. Some borrowers may not be able to secure a lower interest rate with a personal loan.

At Parachute, we may be able to help if you're struggling with high-interest credit card debt, or struggling to manage multiple payments. You can check your eligibility or chat with an advisor to see if it could be the right fit.

The Impact of Using a Loan to Pay Off Credit Card Debt

Taking out a loan to pay off credit card debt can have both short-term and long-term effects on your credit score.

Short-Term vs. Long-Term Effects

When you apply for a loan, the lender will typically perform a hard inquiry on your credit report. This inquiry can have a short-term negative impact on your credit score. However, if you make consistent payments on your loan and reduce your overall debt, your credit score can improve over the long term.

It's important to note that the overall impact of a loan on your credit score will depend on various factors, including your payment history, credit utilization, and length of credit history. By making timely loan payments and managing your credit responsibly, you can minimize any short-term negative effects and potentially improve your credit score in the long run.

Steps to Take Before Applying for a Loan

Before applying for a loan to pay off credit card debt, it's important to take the following steps to ensure that it's a good idea for your unique situation.

Assessing Your Financial Situation

Before applying for a loan, it's crucial to assess your financial situation and determine whether it could actually help you pay off your credit card debt.

Consider the following factors:

  • Credit Score: Your credit score plays a significant role in the interest rate you'll qualify for. A higher credit score can result in more favourable loan terms.
  • Interest Rates: If a loan can provide lower rates than what you're currently paying, it may be worth considering to help pay off your credit card debt. If not, you should take the time to evaluate the other factors and ensure you don't end up paying more in the long run.
  • Financial Habits: Are you struggling to make multiple payments and find yourself missing payments? Do you have a hard time resisting taking on new debt? Understanding your financial habits and being honest with yourself will help you make a decision that you can stick to.

Navigating Loan Agreements and Terms

When taking out a loan to pay off credit card debt, it's crucial to understand the loan agreements and terms. This will ensure that you're aware of the specific details of your loan and can make informed financial decisions.

Understanding Fees and Penalties

Before signing a loan agreement, carefully review the fees and penalties associated with the loan. Common fees and penalties to watch out for include:

  • Origination Fee: Some lenders charge an origination fee for processing the loan. This fee is typically a percentage of the loan amount and can add to the overall cost of borrowing.
  • Late Payment Fees: If you miss a loan payment or make a payment after the due date, you may be charged a late payment fee. This fee can add up over time and increase the total cost of your loan.
  • Prepayment Penalty: Some lenders impose a prepayment penalty if you pay off your loan early. This penalty is designed to discourage borrowers from paying off their loans ahead of schedule and may result in additional fees.

By thoroughly reading the loan agreement and understanding the terms, you can avoid any surprises and make informed financial decisions.

Creating a Repayment Plan That Works

When taking out a loan to pay off credit card debt, it's important to create a repayment plan that aligns with your financial goals and capabilities. A loan to pay off credit card debt is not a magical debt eraser, but rather a debt management tool. By using it as a tool, alongside other debt repayment strategies, you can ensure that you're making the right financial decision.

Set realistic goals for debt repayment based on your financial situation, and ensure that minimum payments are always made. Consider factors such as your income, expenses, and the loan amount. Determine a monthly payment that fits within your budget while still making significant progress on paying off your debt. We recommend using a debt calculator to ensure that your monthly payments and overall amount owed will actually be improved by using a loan to pay off your credit card debt.


Taking out a loan to pay off credit card debt can be a viable option, but it's crucial to understand the implications. Debt consolidation through personal loans offers both advantages and disadvantages. Careful consideration of your financial situation, comparing loan terms, and creating a realistic repayment plan are essential steps. Remember to navigate loan agreements diligently, understanding all associated fees and penalties.

By making informed decisions and prioritizing a structured repayment strategy, you will be able to effectively manage and eliminate your credit card debt while minimizing negative impacts on your credit score.

Frequently Asked Questions

Can You Take Out A Loan To Pay For Credit Cards?

Yes, taking out a personal loan to pay off credit card debt is a common strategy. By consolidating your credit card debt with a personal loan, you can potentially save money on interest and simplify your finances.

Can I Use a Loan to Pay Off Multiple Credit Cards?

Yes, a debt consolidation loan can be used to pay off multiple credit cards. You will simply need to ensure that the loan amount is sufficient to cover all of your credit card balances.

Are There Any Risks in Using a Loan to Pay Off Credit Card Debt?

While using a loan to pay off credit card debt can be beneficial, there are potential risks to consider. Taking on new debt with a loan carries financial risks, and your credit score and overall interest rate can be impacted. It's essential to carefully assess your financial situation and weigh the potential risks before making a decision. While it may seem like a simple solution, you'll need to look out for hidden fees that could actually make it cost more in the long run.

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Bruce Hodges
Bruce, Founder and CEO of Parachute, worked for several of Canada’s top Banks, published research for the Canadian Bankers Association, and taught E-commerce Strategy in Wilfrid Laurier University’s MBA program. His first start-up built credit solutions for the likes of National Bank, Fair Isaac, and Ford Credit globally. Prior to starting Parachute, Bruce was COO of Foresters Financial, and EVP Transformation at CIBC, one of Canada’s top 5 banks. Bruce founded Parachute to disrupt the financial wellness space taking on payday, and high interest predatory lenders, with the intent to bring at risk Canadians back from the brink to good financial health.
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