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.

Key takeaways

• Personal loans typically offer lower interest rates than credit cards, potentially saving you money in interest payments

• Consolidating multiple card payments into one fixed monthly payment can simplify budgeting and reduce missed payment risks

• You'll need to qualify based on your credit score and affordability, with rates varying depending on your circumstances

• Consider the total cost including any fees, and commit to avoiding new credit card spending to prevent debt accumulation

• ClearScore can help you check eligibility for debt consolidation loans without affecting your credit score

Yes, you can use a personal loan to pay off your credit card debt. This approach, known as debt consolidation, lets you replace multiple high-interest card payments with one fixed monthly payment, often at a lower interest rate. However, you'll need to qualify based on your credit score and income, and the total savings depend on the loan terms you're offered.

It is important to always check for 'trailing interest' or residual finance charges that may appear on the following month's statement, even after the balance appears to be cleared.

Understanding credit card debt and personal loans

What is credit card debt and why does it accumulate?

Credit card debt builds when you carry a balance from month to month rather than paying the full amount. With average credit card rates typically over 20%, even small balances can grow quickly through compound interest. Minimum payments typically cover mostly interest rather than the actual debt, meaning balances can persist for years.

This cycle becomes particularly challenging when you're managing multiple cards with different due dates, interest rates, and minimum payments. Many people find themselves making several payments each month whilst still seeing their overall debt increase.

How do personal loans differ from credit cards?

Personal loans work very differently from credit cards. Instead of revolving credit that you can use repeatedly, a personal loan gives you a lump sum upfront that you repay in fixed monthly instalments over a set period, typically 2-7 years.

The key differences include:

• Fixed interest rates: Your rate stays the same throughout the loan term

• Predictable payments: The same amount every month makes budgeting easier

• Set end date: You know exactly when the debt will be cleared

• No temptation to re-spend: Once used to pay off cards, the money isn't available to borrow again

Can you use a personal loan to pay off credit cards?

Absolutely. Using a personal loan to pay off credit card debt is a legitimate and commonly used debt consolidation strategy. Lenders don't restrict how you use personal loan funds, so you can transfer the money directly to pay off your card balances.

The process is straightforward: you receive the loan amount in your bank account, then use those funds to pay off your credit cards in full. This leaves you with just the personal loan to repay instead of multiple card balances.

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 of using a personal loan to clear credit card debt

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.

How to qualify and apply for a debt consolidation loan

Eligibility criteria for UK residents

Most lenders require you to be:

• At least 18 years old

• A UK resident with at least 3 years' address history

• In employment or receiving regular income

• Able to afford the monthly repayments alongside other commitments

Lenders assess affordability by reviewing your income, existing debts, and regular expenses. They'll also check your credit history to determine the interest rate you'll be offered.

Steps to check eligibility without harming your credit score

Many online platforms now offer "soft search" eligibility checks that don't appear on your credit file. This lets you see what loans you might qualify for before making a formal application.

The process typically involves:

• Soft eligibility check: Provides an initial indication of available loans

• Compare options: Review rates, terms, and monthly payments

• Formal application: Only proceed when you've found a suitable option

• Hard credit check: The lender performs a full credit assessment

ClearScore's loan marketplace shows you real loan offers tailored to your credit score, helping you explore options before committing to a full application.

ClearScore is a credit broker and not a lender

How to pay off credit card debt with a loan

Calculate your total debt and loan requirements

Before applying, you'll need to work out exactly how much you owe. This includes all your credit card balances plus any interest charged since your last statement. You'll also want to account for any overlimit charges or late payment fees, and consider the timing - any payments or charges that might occur between now and receiving the loan. Many people add a small buffer by rounding up slightly to ensure they can clear everything.

Apply for and use the loan

Once approved, the loan funds can be used strategically:

• Paying off the highest-interest debts first helps maximise potential savings

• Ensuring each card is completely cleared avoids partial payment interest charges

• Checking your statements to verify all cards show £0.00 gives you peace of mind

• Some people choose to close their cards at this point to remove temptation, though this may affect your credit utilisation ratio

Managing repayments post-consolidation

Success with debt consolidation depends on staying disciplined with your new payment structure:

• Setting up a direct debit ensures you never miss the loan payment

• Avoiding use of the cleared cards helps prevent building new balances while you're still repaying the consolidation loan

• Monitoring your credit score lets you watch for improvements as your utilisation decreases

• Building emergency savings over time can help reduce reliance on credit for unexpected expenses in the future

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 personal loans for credit card debt

Balance transfer credit cards

Balance transfer cards offer 0% interest period (typically 6-29 months), allowing you to pay off debt without additional interest charges. Transfer fees typically apply.

These work best if you can realistically clear the debt within the promotional period. After the 0% rate ends, standard credit card rates apply.

Debt management plans and free advice

If you're struggling with affordability, free debt advice services like Citizens Advice or StepChange can help arrange debt management plans with your creditors. These may reduce monthly payments or freeze interest charges.

Remember: Everyone's financial situation is different. What works best for one person may not be right for another. If you're unsure which option suits your circumstances, free debt advice services can help you find the right path forward.

How ClearScore helps with credit card debt and loans

Free credit score and report monitoring

Understanding your credit position is crucial before applying for any loan. ClearScore gives you free access to your credit score and report, helping you track progress and spot opportunities to grow your financial wellbeing. This helps you:

• Identify areas for improvement before applying

• Spot errors that might affect your eligibility

• Track progress as you pay down debt

• Understand what lenders see when assessing your application

Loan and credit card marketplaces

ClearScore uses soft searches to show you personalised loan and credit card offers without affecting your credit score. This means you can:

• Compare multiple lenders in one place

• See realistic rates based on your credit profile

• Apply with confidence knowing you're likely to be accepted

• Find options that may suit your circumstances

Ready to explore your debt consolidation options? Check your credit score and compare personalised loan offers at ClearScore - it's free and won't affect your credit rating.

Frequently asked questions

Can I get a personal loan if I have bad credit?

You may still qualify for a personal loan with poor credit, though you'll likely face higher interest rates. Compare options through soft search tools to see what's available without affecting your credit file.

How much can I borrow to pay off credit cards?

Personal loan amounts typically range from £1,000 to £50,000, depending on your income and credit score. Lenders will assess what you can afford based on your circumstances. Only borrow what you need to clear your existing debt plus any fees.

Will consolidating debt hurt my credit score?

Initially, applying for a loan creates a hard search on your credit file. However, using the loan to pay off credit cards reduces your credit utilisation, which may help improve your credit score over time. Making loan payments on time also demonstrates responsible borrowing.

What if I can't get a low enough interest rate?

If personal loan rates aren't much lower than your current credit card rates, consolidation may not provide significant savings. Consider balance transfer cards with 0% promotional periods, or focus on paying off high-interest cards first whilst making minimum payments on others.

How quickly can I get a personal loan?

Many lenders can provide decisions within minutes and transfer funds within 1-2 working days. However, it's worth taking time to compare options rather than rushing into the first offer you see.

Can I use ClearScore to find debt consolidation loans?

Yes, ClearScore shows personalised offers from multiple lenders based on your credit profile. The soft search technology means you can compare options without affecting your credit score, helping you find suitable debt consolidation loans with confidence.

What happens to my credit cards after paying them off with a loan?

Your credit cards remain open unless you specifically close them. Many experts suggest keeping them open but unused to maintain your available credit limit, which can help your credit utilisation ratio. However, if you're concerned about temptation to spend, closing some cards might be wise.

Is it worth paying fees for a debt consolidation loan?

This depends on your total savings. Some lenders charge arrangement fees up to 5% of the loan amount. Calculate the total cost including fees and compare it to your current debt costs. The loan should still provide meaningful savings after all charges to be worthwhile.

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.