Stop paying 22% APR on credit card debt.

Personal loans serve a specific purpose: converting high-rate revolving debt (credit cards at 20–27% APR) into a fixed-rate, fixed-term installment loan at a lower rate. For borrowers with good credit, this arbitrage is meaningful — reducing a $20,000 balance from 22% APR to 7.49% APR saves approximately $2,400 per year in interest alone.

When a personal loan makes sense. Debt consolidation is the highest-value use case. If you are carrying balances across multiple credit cards at high interest rates, consolidating into a single personal loan at a lower fixed rate simplifies your finances and reduces total interest paid. Home improvement is another strong use case — adding a deck or renovating a kitchen with a personal loan at 10% is meaningfully better than putting it on a credit card at 22%.

When a personal loan does not make sense. Personal loans should not be used to fund recurring consumption that you cannot afford. If the underlying behavior does not change, consolidating debt only resets the balance — many people consolidate and then rebuild credit card balances on top of the loan payment, worsening their financial position.

APR and all-in cost. Always compare Annual Percentage Rate, not the stated interest rate. Many lenders charge origination fees of 1–8% that are built into the APR but may not be prominently disclosed. A loan advertised at 9.99% with a 5% origination fee has an effective APR of approximately 12–13% depending on term. Lenders like LightStream and SoFi charge no origination fees — start there.

Term length trade-off. Shorter terms mean higher monthly payments but dramatically less total interest. A $20,000 loan at 10% over 3 years costs $4,659 in interest. The same loan over 5 years costs $7,744 — 66% more. If you can afford the higher monthly payment, the 3-year term is almost always the better financial decision.

Rate shopping and credit score. Most top lenders now offer pre-qualification with a soft inquiry — meaning you can check your likely rate without impacting your credit score. Do this with 3–4 lenders before formally applying. When you find the best offer and formally apply, the hard inquiry drops your score briefly (3–5 points) but this impact is minor compared to the long-term savings from the better rate.