Should I use a personal loan or a 0% APR card to get out of debt?

If you want to consolidate your high-interest debt, first weigh the pros and cons of using a personal loan or a zero percent APR credit card. (iStock)

Paying off high-interest debt, such as credit cards and other loans, isn’t as complicated as you may think. If you’re looking to becoming debt-free much faster, one common method is to use a personal loan for debt consolidation or use a zero percent annual percentage rate (APR) credit card to refinance. Either way, this means combining all the debt from each of your cards and loans into one monthly payment with a lower interest rate.

Many people are overwhelmed with debt that never seems to go away. You may even be guilty of making the mistake of paying just the minimum amount requested each month. This means you're largely paying on the interest with very little of your payment going toward the balance. In other words, your debt will continue to grow.

If you’ve decided to consolidate your high-interest debt there are many options to consider. Among them, you can take out a personal loan from a lender and use those funds to pay off all your debt, focusing on higher interest rate cards first. Approximately 114.4 million Americans have taken out a personal loan in the past year, according to recent Finder data. The average personal loan was $11,657.49.

Or you can open a new credit card that offers balance transfers for zero percent interest and pay off that debt with the card.

Should I take out a personal loan to consolidate my debt?

A personal loan can be a great "one and done" way to get rid of your high-interest debt. While the average consumer has four credit cards, according to a 2019 Experian report, some consumers have more, which can lead to problems with keeping up with payments.

It’s a good idea to review each of your credit card and loan statements to find the interest rate. Some may be as high as 30 percent. The higher the rate means even less of your monthly payment is going toward eliminating that debt.

You should consider taking out a personal loan if you have high-interest credit cards and want to manage them better in one easy lower interest rate payment.


Lower annual percentage rate

Fixed installment payments with a set pay off date

You can usually take out a large enough loan amount to cover paying off all your debt accounts

There’s only one bill to keep track of versus having to remember multiple accounts


Interest rate could be higher if your credit is spotty

The loan may come with fees

Installment loan which means no continued access to credit

After weighing the pros and the cons, you may be ready to eliminate that debt with a personal loan. Don’t take the decision lightly and make sure to do your research. One popular site to use for exploring your personal loan options is Credible.


The site walks you through several steps to help you find the best loan and interest rate based on your financial situation and credit history. Once you get to the site it takes just two minutes to get personalized quotes from multiple lenders. This won’t affect your credit score.

Just enter your requested loan amount and click the "debt consolidation" tab.


When is opening a 0% APR credit card the better option?

Sometimes opening a credit card with zero percent APR may be the better option for you. This all depends on your end goal, finances and credit history. If you have multiple high-interest rate cards, and if you don’t need the extended time frame to pay your loan (longer pay off terms offered by a personal loan), you may be better off using a balance transfer credit card.

If you want access to credit card funds through a revolving line of credit, too, a balance transfer card may be a better choice. Online marketplaces such as Credible has a handy list of zero percent APR balance transfer credit card offers.

The bottom line

During these challenging times especially, more people have found themselves with mounting debt. For more ideas on paying off your credit card debt during the coronavirus, it’s good to consider a variety of options to see what works best for you.

Whether consolidating your debt through a personal loan or debt consolidation by transferring your balance to a credit card, you’ll gain the satisfaction of knowing your debt will be paid off much faster. Remember a personal loan will often give you a larger lump sum to pay off all your debt while a zero percent APR debt consolidation may be good for consumers wanting continued access to credit.


But before making a decision on either, remember to do your research. Check out this roundup of nine of the best personal loans to choose from and find out what type of loan and terms they offer.