Credit card debt is a growing burden for many UK households. According to The Money Charity, outstanding credit card debt averaged £2,579 per household as of March 2025. With the average credit card interest rate sitting at around 24.66% in December 2025, according to Bank of England data, even a modest balance can generate a significant interest bill each year.

One option some people consider is taking out a personal loan to clear their credit card balances, sometimes called a debt consolidation loan. The idea is to replace multiple high-interest balances with a single, fixed-rate monthly payment, potentially at a lower rate. But whether this approach makes sense depends on your personal circumstances, the rate you can actually secure, and your ability to maintain repayments.

This guide explains how personal loans for debt consolidation work, the potential benefits and risks, and what alternatives are available.

ClearScore is a credit broker, not a lender. Always make sure you can afford repayments.

How do personal loans and credit cards differ?

The main difference is in structure. Credit cards give you revolving access to credit up to your limit. You can borrow, repay, and borrow again. A personal loan provides a lump sum upfront and requires fixed monthly repayments until the balance is cleared.

This structure can be useful when consolidating debt, but it is worth understanding that the interest rate you are offered on a personal loan is not fixed universally. Lenders assess each application individually. According to Finder UK, the average interest rate on a £5,000 personal loan was around 10.05% as of February 2026, while rates on £10,000 loans averaged around 6.33%. However, the rate you receive will depend on your credit health and financial circumstances.

Typical eligibility for a debt consolidation loan

Personal loans regulated by the FCA are available to most UK adults, though lenders set their own criteria. Most require:

• UK residency

• Age 18 or over (some lenders require 21+)

• Regular income from employment, self-employment, or eligible benefits

• A credit history that meets the lender's minimum requirements

The rate you are offered, and whether you are accepted, will vary by lender. The advertised representative APR is the rate offered to at least 51% of successful applicants. You may be offered a higher rate based on your individual circumstances.

Possible benefits of using a personal loan to clear credit card debt

There are several reasons why consolidating credit card debt with a personal loan may be worth considering. These benefits are not guaranteed and depend on the rate you can secure and your financial situation.

Potentially lower interest rate

The main reason people consider this option is the prospect of reducing the interest rate on their debt. With the average credit card rate around 24.766% (Bank of England, May 2026), a personal loan could in some cases carry a lower rate, particularly for applicants with a good credit history.

In fact, average rates on new lending are 2-4x higher for credit cards compared to unsecured personal loans. Bank of England data shows that typical credit card borrowing rates are around 24.7% as of May 2026, while the average interest rate on £10,000 unsecured personal loans is just 6.4%.

Interestingly, the average rate on smaller £5,000 personal loans is around 10.8% — nearly double the rate on larger loans. This might seem counterintuitive, but smaller loans tend to be taken out by a broader, more credit-diverse population, including higher-risk borrowers. Larger loans are more often extended to borrowers who have passed more rigorous affordability and credit checks, meaning the pool of £10k borrowers is on average a lower credit risk than the pool of £5k borrowers. 

However, it is not guaranteed that a personal loan rate will be lower. If your credit score is poor or your financial circumstances are not straightforward, the rate you are offered may be higher than expected and could even exceed your current card rates. Always check the rate you are actually offered before proceeding.

Note: The rate you are offered depends on your individual credit profile. These are indicative ranges only.

Fixed payments and a clear end date

Unlike credit cards, where minimum payments are calculated as a percentage of the outstanding balance and can keep you in debt for many years, a personal loan has fixed monthly repayments and a defined end date. According to The Money Charity, a credit card balance paid only at the minimum repayment rate could take over 27 years to clear at today’s average rate. A personal loan over a fixed term avoids this, as long as you maintain repayments.

Fixed payments also make budgeting more straightforward, as you know exactly what you will pay each month.

Simplified debt management

If you hold balances on several cards with different due dates and minimum amounts, consolidating into a single loan payment can reduce the administrative burden and lower the risk of missed payments.

Possible effect on credit utilisation

Clearing credit card balances with a loan may reduce your credit utilisation ratio (the proportion of your available credit you are using), which is one of the factors considered by credit reference agencies when calculating your credit score. This could have a positive effect, though any benefit will vary depending on your overall credit profile.

Risks and drawbacks to consider

A personal loan for debt consolidation is not without risk. It is important to understand the potential downsides before applying.

Higher monthly payments than minimum card payments

A personal loan requires fixed monthly repayments, which are typically higher than the minimum payment on a credit card. If you are currently struggling to meet minimum payments, a higher fixed commitment could put further strain on your finances.

The above figures are illustrative only. Always use a loan calculator to understand your specific monthly commitment before applying.

Always make sure you can afford repayments.

Risk of building up new credit card debt

One of the most significant risks with this approach is using a loan to clear your cards, then running up new balances on the same cards. This would leave you with both loan repayments and credit card debt simultaneously, which could be a worse position than before.

Organisations such as MoneyHelper caution that consolidation only works if accompanied by a genuine change in spending habits. Before taking this route, consider whether you would be willing to reduce your available credit on cards or close accounts after clearing them.

Fees and additional costs

Some personal loans include arrangement fees or early repayment charges. These should be factored into the total cost comparison. Missed or late payments typically incur fees and will be recorded on your credit file.

You may not get a lower rate

If your credit score is below average, the personal loan rate you are offered may not be lower than your existing credit card rates. Lenders are not obliged to offer the advertised representative APR. Always use a soft search tool to check eligibility before making a formal application.

Hard credit search impact

Most personal loan applications involve a hard credit search, which is recorded on your credit file and may temporarily affect your credit score. Making several applications in a short period can compound this effect. Use eligibility checkers that use soft searches first to understand your likely options before applying.

When might a personal loan be worth considering?

A personal loan for debt consolidation is more likely to be a sensible option if:

• You can secure a personal loan rate that is meaningfully lower than your existing card rates

• You have a stable income and can comfortably afford the fixed monthly repayments

• You have multiple card balances and would benefit from simplified management

• You are committed to not building up new balances on the cleared cards

It is less likely to be suitable if your credit score means you will only be offered a high rate, if you cannot reliably afford the monthly repayments, or if you are already in financial difficulty. In those circumstances, free debt advice may be more appropriate.

If you are unsure, MoneyHelper offers free, impartial guidance on debt options.

How to improve your chances of a competitive rate

The rate you are offered depends heavily on your credit profile. There are steps you can take before applying:

• Check your credit report: You can check your credit report for free with UK credit reference agencies including Experian, Equifax, and TransUnion. Errors on your report could be affecting your score.

• Reduce existing card balances where possible: Lowering your credit utilisation before applying may improve the rate you are offered.

• Use soft search eligibility checkers: Many lenders and comparison tools offer soft search checks that do not affect your credit score. Use these to narrow down realistic options before applying.

• Apply selectively: Limit formal applications to lenders where you are likely to be accepted. Multiple hard searches in quick succession can reduce your credit score.

• Check your debt-to-income ratio: Lenders will assess whether your existing debt commitments are manageable relative to your income.

Alternatives to a personal loan

A personal loan is not the only option for managing credit card debt. Depending on your circumstances, these alternatives may be worth exploring:

Balance transfer credit cards

A 0% balance transfer card lets you move existing credit card debt to a new card and pay no interest during an introductory period. According to Moneyfacts data, the average 0% balance transfer period rose to around 585 days (approximately 19 months) by December 2025, with some market-leading cards offering up to 36 months. A typical balance transfer fee applies, averaging around 2.51% of the transferred amount.

This can be a cost-effective option if you can repay the debt within the interest-free period. If you do not, the remaining balance will typically revert to a higher rate. This option usually requires a good credit score.

Debt management plans (DMPs)

A debt management plan (DMP) is an informal arrangement where you make a single reduced monthly payment to a provider, who distributes it among your creditors. Free DMPs are available through charities including StepChange, Citizens Advice, and Payplan.

A DMP does not involve taking out new credit. Creditors are often willing to freeze or reduce interest during the plan, though this is not guaranteed. A DMP will typically be recorded on your credit file and may affect your ability to obtain credit during the plan.

If you are struggling with debt, seeking free advice from one of these organisations is a sensible first step before making any financial decisions.

Debt snowball or avalanche methods

These are budgeting approaches that involve no additional borrowing. With the debt snowball method, you pay minimum amounts on all cards except the one with the smallest balance, which you clear first, then move to the next. The debt avalanche method targets the highest interest rate card first, which saves the most money over time but requires greater discipline.

Both approaches require a surplus in your monthly budget after essential expenses.

Secured loans (approach with caution)

Some homeowners consider securing a consolidation loan against their home. While this can offer a lower interest rate, it converts unsecured debt into secured debt, meaning your home could be at risk if you cannot maintain repayments. This option should only be considered after taking independent financial advice.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Overview: comparing debt management options

Applying for a debt consolidation loan: what to check

Before applying for any personal loan, it is worth carrying out some basic due diligence:

• Check the lender is FCA-authorised: You can verify any lender’s status on the FCA register. Avoid any lender not listed.

• Check your credit report: Obtain a free copy from Experian, Equifax, or TransUnion before applying.

• Use soft search tools: Many lenders and comparison services allow you to check likely eligibility without affecting your score.

• Compare total cost, not just APR: Factor in any arrangement fees, early repayment charges, and the total amount repayable over the full term.

• Read the terms carefully: Understand what happens if you miss a payment, and whether early repayment is possible without penalty.

• Avoid unregulated lenders: Warning signs include guaranteed approval regardless of credit history, requests for upfront fees, or pressure to decide immediately.

Frequently asked questions

Is a personal loan a good way to pay off credit card debt?

It depends on your circumstances. If you can secure a personal loan at a meaningfully lower rate than your credit cards, can comfortably afford the fixed repayments, and are committed to not building up new card balances, it can reduce the total interest you pay and give you a clear timeline for clearing the debt. However, it is not suitable for everyone, and the rate you are offered will depend on your credit profile.

What credit score do I need?

There is no universal threshold. Each lender sets its own criteria. Generally, a stronger credit score increases your chances of being offered a competitive rate. You can check your credit score for free using UK credit reference agencies such as Experian. If your score is low, some lenders may still offer loans but at a higher rate that may not represent an improvement on your current cards.

Can I use a personal loan to pay off multiple credit cards?

Yes. You can use a personal loan to pay off balances across multiple credit cards, store cards, and other unsecured debts, combining them into a single monthly repayment. Whether this is beneficial will depend on the rate and terms you are offered.

What happens to my credit cards once I have paid them off?

Once cleared, you can choose to keep the cards open, reduce the credit limits, or close them. Keeping cards open with a zero balance can support your credit utilisation ratio, but there is a risk of building up new balances. Some people choose to close accounts to reduce temptation. Either approach is valid, and the right choice depends on your spending habits and financial goals.

Where can I get free debt advice?

Free, impartial debt advice is available from StepChange, Citizens Advice, MoneyHelper, and Payplan. These organisations can help you assess all available options without any obligation.

Important information

ClearScore is a credit broker, not a lender.

Always make sure you can afford repayments before taking out any credit product.

This article is intended for general information only and does not constitute personalised financial advice. Eligibility for any financial product depends on your individual circumstances and the lender’s assessment. ClearScore does not recommend any specific product or provider.