August 13, 2025
A personal loan with a low interest rate can be tempting when you’re struggling with credit card debt. It’s often not the solution it appears though. These are the best ways to handle credit card debt.
When you’re staring down a large credit card balance, the stress can feel overwhelming. High interest rates (often around 20%) can make it difficult to make any real progress in paying it down, and it’s tempting to consider a personal loan to cover the debt. After all, personal loans often come with lower interest rates than credit cards, so on the surface, it might seem like a smart solution.
But while a personal loan could provide some short-term relief, it’s often not the best path to long-term financial stability. There are other ways to tackle your credit card debt that don’t involve taking on new debt. We'll look at why a personal loan often isn't a good solution and what are some of the other options available under these circumstances.
Personal loans often have a lower interest rate than that of a credit card, so it makes sense to just one loan to pay the other, right?
It’s not that simple, unfortunately.
While a personal loan may reduce the interest rate on your credit card debt, it won’t reduce the total amount you owe. This means you’re still paying back the same debt total, just at a potentially lower rate.
Essentially, getting a personal loan to pay off your credit card doesn’t fix the core issue: the debt itself.
You may be tempted to use your credit card again after using the money from a personal loan to pay it off. This means carrying both the loan and new credit card balances at once.
Additionally, taking out a loan to pay off credit cards could impact your credit score, as it may temporarily increase your debt-to-income ratio.
In short: using a personal loan to pay off your credit card bill is likely to land you in more debt.
There are other options you should consider instead.
If you have debt, you want to avoid more debt.
If you’re struggling with credit card bills, one of the first things you should do is stop using the card altogether. When you continue making purchases on a credit card while already carrying a balance, it’s easy to dig yourself further into debt, especially as interest accumulates. By pausing new charges, you can focus solely on paying down your existing balance without adding to the problem.
Removing your saved payment info from online browsers and shopping apps can help reduce the temptation to rely on your credit card for quick or impulsive purchases. Without that immediate access, you’re more likely to consider alternative payment methods that don’t add to your debt.
Once you’ve stopped using the credit card, it’s time to focus on removing the debt. The key to this is to always pay more than the minimum amount.
Paying more than the minimum on your credit card each month can make a big difference in getting your debt under control. While it may feel manageable to pay only the minimum, this strategy usually means you'll be carrying that balance—and accumulating interest—for years.
Credit cards come with high interest rates, so when you pay the minimum amount, most of that money goes toward interest rather than the principal balance (the principal is the total amount you owe).
By paying even a small amount over the minimum, you’ll be chipping away at the principal faster, which reduces the amount of interest you’ll pay in the long run. Even an extra $20 or $50 each month can help you get closer to being debt-free.
This approach may require budgeting and planning, but it's a crucial step toward making real progress on your credit card debt and achieving financial freedom sooner.
What if you don’t see a way to get rid of the debt on your own though?
Although it can feel daunting to reach out and admit you’re struggling, many credit card companies are willing to work with you if they know your situation. By contacting them, you might open the door to options that make repayment more manageable.
Credit card companies can offer a variety of options to help you afford your bills. Remember, they want you to be able to pay.
If you choose any of these options, make sure to get the full terms in writing before agreeing.
One possibility is a lump-sum payment agreement, where you negotiate to pay a reduced balance in one payment.
An example of how this might work is if you had $2,000 worth of credit cards. You and the credit card company agree to let you pay $1,300 at once and have the remaining $700 written off.
Another option is a payment plan, which allows you to pay down your balance over an extended period at potentially a lower interest rate. This means your monthly payments will be lower, but it will take longer to pay off the debt.
Some companies may even offer a workout agreement, where you and your credit card company modify the terms of your repayment in a way that suits your needs.
All these options are likely to drop your credit score, but the drop will not be as bad as it would if you continued to be unable to afford the bill.
Taking this step shows your creditors that you’re serious about paying off your debt, which can work in your favor. While these options may vary by credit card provider, reaching out is a proactive way to find a solution tailored to your needs.
There is one more option which can reduce the amount you need to pay back.
If you’re struggling with credit card debt and other unsecured debts, a consumer proposal could be a good option to consider. It’s a legal process where you work with a Licensed Insolvency Trustee to negotiate a deal with your creditors to reduce the amount you owe.
A consumer proposal could reduce the amount you owe by up to 80% and it’s tailored to your unique situation. No two proposals are alike.
A consumer proposal usually lasts up to five years, giving you the flexibility to make affordable monthly payments based on your financial situation. Your Licensed Insolvency Trustee will assess your income, expenses, and assets to help you create a proposal that’s manageable for you. Your creditors vote on whether to accept your proposal.
If most of your the creditors agree, the proposal becomes legally binding.
A consumer proposal allows you to keep all your assets, meaning you won't lose your car, home, or any other possessions.
It even halts collection calls, wage garnishments, and legal actions from creditors, providing immediate relief from the pressure of mounting debt.
Working with a Licensed Insolvency Trustee is one of the best ways to tackle credit card debt. At BDO Debt Solutions, our Trustees are regulated by the federal government and follow strict standards of professionalism and ethical conduct.
Our Licensed Insolvency Trustees take a non-judgmental, compassionate approach to helping you with your debt. They understand that everyone’s financial situation is unique, and that life can throw unexpected challenges your way.
During the first meeting, which is free of charge, they’ll assess your financial situation, explain all your available options, and help you choose the best path forward. Their goal is to help you get back on track and work toward becoming debt-free.
August 13, 2025
A personal loan with a low interest rate can be tempting when you’re struggling with credit card debt. It’s often not the solution it appears though. These are the best ways to handle credit card debt.
