Calculate your monthly personal loan payment and total interest cost. Compare 24, 36, and 60-month terms, and find out when a personal loan beats carrying credit card debt.
Based on avg personal loan of $8,000 at 12% APR
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Open Loan Calculator →Personal loans come in several varieties, each suited to different financial needs:
The most common type — these loans require no collateral. Approval is based entirely on your creditworthiness (credit score, income, debt-to-income ratio). Because lenders take on more risk without collateral, rates are higher than secured loans. Amounts typically range from $1,000 to $100,000, with most borrowers taking $5,000–$15,000. Common uses: debt consolidation, medical bills, home improvements, and major purchases.
Some lenders offer secured personal loans backed by assets like a savings account, certificate of deposit, or vehicle. Because the lender can claim the collateral if you default, rates are lower — sometimes 5–8% APR. These are useful for borrowers with fair credit who want better rates, or for building credit history with a manageable risk.
A specific use case for personal loans: rolling multiple high-interest debts (credit cards, medical bills, payday loans) into one fixed-payment loan at a lower rate. The math is compelling when your personal loan APR is meaningfully below your credit card rate. The average credit card carries a 20–22% APR in 2025; consolidating to a 12% personal loan saves approximately $800/year in interest per $10,000 of balance.
A personal loan beats a credit card when:
1. You need a fixed payoff timeline. Credit cards allow minimum payments indefinitely, making it easy to stay in debt for years. A personal loan forces full repayment by a specific date.
2. The APR is meaningfully lower. If your credit card charges 24% and you qualify for a 12% personal loan, the savings on a $10,000 balance over 3 years are approximately $1,800 in interest.
3. You're consolidating multiple payments. Managing one fixed monthly payment is simpler than juggling multiple credit cards, reducing the risk of missed payments and late fees.
A credit card beats a personal loan when you can pay the balance within the 0% promotional APR window, or if you have excellent payment discipline and can keep utilization low.
The short-term impact of a personal loan application is a small credit score dip (5–10 points) from the hard inquiry. But the medium-to-long-term effects can be very positive, especially if you're using the loan to pay down credit card balances. Credit utilization (the ratio of your balances to credit limits on revolving accounts) is the second most important factor in your FICO score. Moving $10,000 from credit cards to a personal loan can drop your utilization from 60% to 5%, potentially improving your score by 30–60 points. Additionally, a personal loan adds installment loan experience to your credit mix, which FICO rewards if you don't already have installment accounts.
Use a personal loan when you need a fixed payoff timeline, when the loan APR is lower than your card rate (avg 12% loan vs. 20–24% card), or when consolidating multiple debts. Stick with a card if you have 0% promo APR or can pay the balance quickly.
Minimum is typically 580–600 for approval, but rates improve significantly at 660+ (fair), 700+ (good), and 740+ (excellent). Below 620, rates of 25–35%+ make many personal loans uneconomical.
The hard inquiry causes a temporary 5–10 point dip. But using the loan to pay off credit cards reduces utilization — a bigger positive factor. Net effect is often a score improvement of 20–60 points within 1–3 months.
Approximately 12–13% APR for good credit (700+) in 2025. Range: 7–9% for excellent credit, 25–35% for fair credit (580–640). Online lenders like LightStream and SoFi typically offer better rates than traditional banks.