Can I get a line of credit to pay off credit card debt? (2024)

Can I get a line of credit to pay off credit card debt?

Because you can usually get a line of credit at a lower interest rate than your credit card, using a line of credit to pay off credit card debt can reduce your total interest costs and reduce the amount of time you're in debt.

Aside from consolidating your debt into one convenient monthly payment versus many, this is where a personal line of credit can really pay off. Lines of credit usually come with a significantly lower interest rate than credit cards.

Taking out a personal loan for credit card debt can help you solve many of these problems. You can use your personal loan to pay off your credit card debt in full. Since personal loans typically have lower interest rates than credit cards, you might even save money in interest charges over time.

A HELOC (home equity line of credit) can be a useful tool for paying off credit card debt, as it often has a lower interest rate and a long repayment period. Using a HELOC to pay off debt comes with risks, such as the potential to accrue more debt or even lose your home if you cannot make payments.

As of November 2023, the average interest rate on a personal loan with a 24-month term was 12.35%, according to data from the Federal Reserve. So, by using a personal loan to pay off your credit card debt, there could be significant savings, as the average credit card rate is currently 21.47%.

Consider filing for bankruptcy

Filing for Chapter 7 bankruptcy wipes out unsecured debt such as credit cards, while Chapter 13 bankruptcy lets you restructure debts into a payment plan over three to five years and may be best if you have assets you want to retain.

You can also use the Rule of 72 to plug in interest rates from credit card debt, a car loan, home mortgage, or student loan to figure out how many years it'll take your money to double for someone else. For example, the average interest rate for credit cards is 17.3%. If you divide 72 by that rate, you get 4.16 years.

It will take 47 months to pay off $20,000 with payments of $600 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.

Can I get a government loan to pay off debt?

Key Takeaways. There aren't any free government debt relief programs for credit card or personal loan debt other than bankruptcy. Many types of government debt relief exist in the form of grants and low-interest loans for specific purposes.

There isn't a specific amount of credit card debt that's considered too much. Instead, it depends on your individual financial situation and how you're using your credit cards. U.S. consumers had an average total credit card balance of $6,501 as of the third quarter (Q3) of 2023, a 10% increase from the previous year.

To calculate the monthly payment on a $50,000 HELOC, you need to know the interest rate and the loan term length. For example, if the interest rate is 9% and the loan term is 30 years, the monthly payment would be approximately $402.

Because you can usually get a line of credit at a lower interest rate than your credit card, using a line of credit to pay off credit card debt can reduce your total interest costs and reduce the amount of time you're in debt.

Watch out for balloon payments: If you don't manage your HELOC monthly payments properly, you could be hit with a large “balloon payment” at the end of your repayment period. This large payment can trap you in a cycle of debt if you can't pay it off or, worse, could result in losing your home.

If you can afford to pay off your debt during the promotional APR period, a balance transfer card may be your best bet. For example, with $5,000 of debt, a six-month intro APR balance transfer card would allow you to pay off your debt interest-free with $833.33/month payments.

Will a personal loan to pay off credit card debt help my credit score?

There are several ways to tackle hefty balances — like the avalanche and snowball methods — but a personal loan could help consolidate credit card debt and boost your credit score. According to the latest LendingTree study, a personal loan can offer significant assistance.

Freedom Debt Relief is a legitimate company established in 2002 to provide debt negotiation services. It's a founding member of the American Association for Debt Resolution (formerly the American Fair Credit Council) and affiliated with the International Association of Professional Debt Arbitrators.

You may be eligible for income-driven repayment (IDR) loan forgiveness if you've have been in repayment for 20 or 25 years. An IDR plan bases your monthly payment on your income and family size.

Debt settlement programs are typically offered by for-profit companies to people with significant credit card debt. The companies negotiate with your creditors to let you pay a “settlement,” or lump sum of money that's less than what you owe. They agree that this amount will settle your debt.

Unfortunately, there is no such thing as a government-sponsored program for credit card debt relief. In fact, if you receive a solicitation that touts a government program to get you out of debt, you may want to think twice about working with that company.