Borrowers Could Save Up to $3,000 — and 10 Months — By Consolidating $10,000 in Credit Card Debt Into a Personal Loan
Drowning in credit card debt? A new LendingTree study shows that high-credit borrowers could save up to $3,000 and significantly reduce their repayment time by consolidating $10,000 worth of credit card debt into a low-interest personal loan with the same monthly payment.
Researchers examined how much interest borrowers would pay on a personal loan and credit card with balances of $5,000 and $10,000. We calculated total costs using average APRs from personal loan inquiries on the LendingTree platform and compared those costs with the average APR on credit accounts assessed interest of 20.40%.
Our findings indicate that a borrower could save significant money and time with a debt consolidation loan, even if their credit score isn’t in the top tier.
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Key findings
- Consolidating $10,000 of credit card debt into a personal loan could save borrowers up to $3,000. Consumers with a credit score of 760 or higher could save $3,000 by choosing a $10,000 personal loan over $10,000 in credit card debt at the same monthly payment. This is due to the wide variance in the APRs we assumed they’d receive — 8.93% for the personal loan and 20.40% for the credit card.
- Debt consolidation can save you money — and time. Saving $3,000 is significant, but choosing the personal loan in the scenario above would also save those borrowers with credit scores of 760 or higher 10 months in payoff time. At the established monthly minimum of $318, it would take 46 months to pay off the $10,000 credit card balance.
- The majority of personal loan inquiries on the LendingTree platform are for debt consolidation and credit card refinancing. 57.9% of inquiries on the platform in February 2023 were for these two personal loan types, showing consumers know their value.
How borrowers could save up to $3,000 (and up to 10 months)
Slashing your interest rate could make paying down debt more manageable.
Although credit cards come with many perks, including rewards and incentives, they also tend to have higher APRs. According to the latest Federal Reserve data from November 2022, the average APR for credit card accounts assessed interest is 20.40%. In comparison, the average APR for a 36-month personal loan for those with a credit score of 760 and up through the LendingTree platform is 8.93%. As you can see, these rates differ significantly (11.47 percentage points).
This was the basis for our study that looked at the time and money needed to repay $10,000 in credit card debt or $10,000 in personal loan debt at the same monthly payment.
According to LendingTree chief credit analyst Matt Schulz, consolidating that credit card debt into a personal loan could be smart.
“The more you can reduce your interest payments, the quicker you can pay off your debt, which is the ultimate goal,” he says. “It’s also about streamlining your finances. Consolidating the debt from several cards into one single personal loan payment means you’ll have fewer payments to worry about each month.”
Below, you can see how a borrower with a credit score of 760 or higher (in the very good to excellent range) could save up to $3,000 by going with a personal loan over a credit card.
Credit card vs. personal loan debt
$10,000 balance with a 760+ credit score
| Credit card | Personal loan | Difference | |
|---|---|---|---|
| Total payoff time (months) | 46 | 36 | 10 |
| Total interest paid | $4,436 | $1,436 | $3,000 |
| Total paid | $14,436 | $11,436 | $3,000 |
| Monthly payment | $318 | $318 | Same |
Source: Analysis of Federal Reserve and LendingTree data. Note: We assumed borrowers had a 20.40% APR on their credit card (based on November 2022 Federal Reserve data) and an 8.93% APR on their personal loan (based on a 36-month personal loan through the LendingTree platform in February 2023).
We also looked at those carrying balances of $5,000. For borrowers with a credit score of 760 or higher, consolidating credit card debt into a personal loan could save $1,500 and 10 months of repayment if maintaining the same monthly payment.
Credit card vs. personal loan debt
$5,000 balance with a 760+ credit score
| Credit card | Personal loan | Difference | |
|---|---|---|---|
| Total months | 46 | 36 | 10 |
| Total interest paid | $2,218 | $718 | $1,500 |
| Total paid | $7,218 | $5,718 | $1,500 |
| Monthly payment | $159 | $159 | Same |
Source: Analysis of Federal Reserve and LendingTree data. Note: We assumed borrowers had a 20.40% APR on their credit card (based on November 2022 Federal Reserve data) and an 8.93% APR on their personal loan (based on a 36-month personal loan through the LendingTree platform in February 2023).
Borrowers with lower credit scores could still save
Researchers also looked at $5,000 and $10,000 balances based on two other credit score ranges — 720 to 759 (good to very good) and 680 to 719 (good). The average personal loan APRs changed with each range — based on the average offered through the LendingTree platform — but still showed decent savings compared to credit card debt.
A borrower with a credit score between 720 and 759 could save up to $1,874 and trim six months off their repayment term by consolidating $10,000 worth of credit card debt into a personal loan with the same monthly payment. Meanwhile, a borrower in this credit range with $5,000 in credit card debt could save up to $937 and reduce their repayment term by six months by instead using a personal loan.
Credit card vs. personal loan debt
$10,000 balance with a 720 to 759 credit score
| Credit card | Personal loan | Difference | |
|---|---|---|---|
| Total months | 42 | 36 | 6 |
| Total interest paid | $4,026 | $2,152 | $1,874 |
| Total paid | $14,026 | $12,152 | $1,874 |
| Monthly payment | $338 | $338 | Same |
Source: Analysis of Federal Reserve and LendingTree data. Note: We assumed borrowers had a 20.40% APR on their credit card (based on November 2022 Federal Reserve data) and a 13.13% APR on their personal loan (based on a 36-month personal loan through the LendingTree platform in February 2023).
Credit card vs. personal loan debt
$5,000 balance with a 720 to 759 credit score
| Credit card | Personal loan | Difference | |
|---|---|---|---|
| Total months | 42 | 36 | 6 |
| Total interest paid | $2,013 | $1,076 | $937 |
| Total paid | $7,013 | $6,076 | $937 |
| Monthly payment | $169 | $169 | Same |
Source: Analysis of Federal Reserve and LendingTree data. Note: We assumed borrowers had a 20.40% APR on their credit card (based on November 2022 Federal Reserve data) and a 13.13% APR on their personal loan (based on a 36-month personal loan through the LendingTree platform in February 2023).
Lastly, researchers analyzed how much borrowers with a credit score between 680 and 719 could expect to save when consolidating their debt. Although savings in this range aren’t quite as profound as those for the other examples, it is still worth noting.
Carrying a $10,000 balance on a personal loan over a credit card could save borrowers in this credit range up to $619, reducing their repayment term by two months while maintaining the same monthly payment. Our final example shows the smallest savings — only $309 — when borrowing $5,000 with a personal loan over a credit card in the same range.
Credit card vs. personal loan debt
$10,000 balance with a 680 to 719 credit score
| Credit card | Personal loan | Difference | |
|---|---|---|---|
| Total months | 38 | 36 | 2 |
| Total interest paid | $3,628 | $3,009 | $619 |
| Total paid | $13,628 | $13,009 | $619 |
| Monthly payment | $361 | $361 | Same |
Source: Analysis of Federal Reserve and LendingTree data. Note: We assumed borrowers had a 20.40% APR on their credit card (based on November 2022 Federal Reserve data) and a 17.97% APR on their personal loan (based on a 36-month personal loan through the LendingTree platform in February 2023).
Credit card vs. personal loan debt
$5,000 balance with a 680 to 719 credit score
| Credit card | Personal loan | Difference | |
|---|---|---|---|
| Total months | 38 | 36 | 2 |
| Total interest paid | $1,814 | $1,505 | $309 |
| Total paid | $6,814 | $6,505 | $309 |
| Monthly payment | $181 | $181 | Same |
Source: Analysis of Federal Reserve and LendingTree data. Note: We assumed borrowers had a 20.40% APR on their credit card (based on November 2022 Federal Reserve data) and a 17.97% APR on their personal loan (based on a 36-month personal loan through the LendingTree platform in February 2023).
While any savings is generally better than no savings at all, it’s worth noting that debt consolidation loan fees might negate this difference. Borrowers are advised to weigh the pros and cons (more on this below) before proceeding to ensure they maximize their savings.
Nearly 6 in 10 seek personal loans for debt consolidation or credit card refinancing
Based on February 2023 personal loan inquiries on the LendingTree platform, potential borrowers are most interested in debt consolidation (38.4%) and credit card consolidation (19.4%). This illustrates the main ways people manage debt.
Reasons for taking a personal loan in February 2023
| Debt consolidation | 38.4% |
| Credit card refinance | 19.4% |
| Other | 18.8% |
| Home improvement | 6.7% |
| Major purchase | 4.5% |
| Everyday bills | 2.7% |
| Moving and relocation | 2.7% |
| Medical expenses | 2.1% |
| Car financing | 1.4% |
| Car repair | 1.1% |
| Business | 0.8% |
| Vacation | 0.6% |
| Wedding expenses | 0.4% |
| Homebuying | 0.3% |
| Unknown | 0.2% |
Source: Analysis of personal loan inquiries on the LendingTree platform in February 2023. Totals don’t equal 100% due to rounding.
While credit cards can be a good way to cover short-term expenses — especially if you pay the full balance each month — there’s generally no point in paying a higher interest rate when more affordable options are at your fingertips. That’s where a consolidation loan can come to the rescue.
Whatever your reason for exploring a debt consolidation, personal loan or credit card refinance, make sure you can secure a better deal than your current rates.
Pros and cons of debt consolidation
Consolidating your debt makes sense if you can score a lower interest rate. However, it’s still worth considering the advantages and disadvantages before moving forward.
Pros and cons of debt consolidation
| Pros | Cons |
|---|---|
Lower interest rates One easy-to-manage monthly payment Can help repay debt quicker On-time payments can boost your credit | Not everyone qualifies for the lowest rate Might come with upfront costs Missing payments might cause more damage Won’t solve long-term financial problems |
Pros of debt consolidation
Lower interest rates
One of the top reasons to consolidate debt is to access a lower interest rate, which can save money in the long run.
As outlined in our study, borrowers can reduce their total repayment by switching to a low-rate personal loan. However, your new rate will depend on your current balances and credit score. Our debt consolidation calculator can help estimate if the new rate is worth making the switch.
One easy-to-manage monthly payment
Consolidating can ease the burden of keeping track of multiple payments and various interest rates. Basically, having one monthly payment can help reduce the risk of forgetting a bill or going into default.
Further, consolidating can provide a simple timeline to becoming debt-free, which can be a motivating factor for many.
Can help repay debt quicker
By securing a lower interest rate, more of your payment can go toward the loan’s principal. This is how borrowers can trim months off their repayment period.
On-time payments can boost your credit
Although applying for new credit requires a hard credit check, making on-time payments on your new loan can help build your credit. Your credit utilization ratio will also improve once you’ve paid off your credit card debt.
Cons of debt consolidation
Not everyone qualifies for the lowest rate
In general, borrowers with the highest scores get the lowest rates. If your score is less than ideal, a debt consolidation loan for bad credit might help. However, it’s important to make sure your new rate is less than what you’re currently paying.
Might come with upfront costs
A debt consolidation loan may come with additional fees, which can include the following:
Research before signing the dotted line to ensure the extra fees are worth it.
Missing payments might cause more damage
Falling behind in loan or credit card payments is generally bad news. You can expect to pay a late fee, plus the missed payment will likely be reported to the credit bureaus, thus jeopardizing your credit score.
However, you might have a little wiggle room with credit cards, especially with a long-term 0% interest promotional offer.
In the end, you’ll want to ensure you can afford the new monthly payment before consolidating your debt.
Won’t solve long-term financial problems
Debt consolidation might help fix your immediate financial woes, but it doesn’t prevent you from slipping into the same debt patterns in the future.
To help break the cycle, consider a debt consolidation program. A credit counselor can help you create a debt management plan and improve your spending habits.
Schulz recommends creating a solid budget to stay on top of debt.
He also advises regularly reviewing your budget. Inflation, for example, can give us an inaccurate picture of where we stand today. So take the time to review, assess and implement a new plan as the financial climate changes.
Methodology
LendingTree researchers analyzed personal loan inquiries on the LendingTree platform in February 2023 to calculate average APRs for borrowers with different credit scores and determine why potential borrowers seek personal loans. The APR data is from Feb. 1 to 22, while the personal loan reasons data is from Feb. 1 to 28.
The credit score ranges researchers examined were:
- 680 to 719 (good)
- 720 to 759 (good to very good)
- 760-plus (very good to excellent)
We first assumed a borrower took out a $5,000 or $10,000 personal loan with a three-year term. APRs are based on averages for 36-month personal loans on the LendingTree platform. We used this criteria to calculate the average monthly payment on this loan type across the three credit score ranges.
We then calculated how long it would take to pay off the same amount in credit card debt by making the same monthly payments. A 20.40% APR was assumed based on the latest Federal Reserve data.