The total debt you want to pay off.
Personal Loan is more cost-effective
Estimated total interest savings of £1,974.83 with a debt-free date 1 yr 4 mo sooner.
Consolidating Debt
Deciding between keeping a balance on a credit card or consolidating it into a personal loan is a common financial crossroad. This modelling tool helps you compare the two paths based on the interest rates and repayment terms available to you.
Credit Card Dynamics
Credit cards offer flexibility but often come with higher, variable interest rates. Because the minimum payment is usually a percentage of the balance, credit cards can take decades to clear if only the minimum is paid. However, they allow you to pay as much or as little as you want each month (above the minimum).
Personal Loan Benefits
Personal loans typically offer a fixed interest rate and a structured repayment term. This provides certainty—you know exactly when the debt will be cleared and how much it will cost. Often, loans have lower interest rates than cards, making them a popular choice for consolidating high-interest credit card debt.
Strategic Debt Repayment
Beyond the immediate interest savings, consolidation can offer a psychological 'clean slate'. Managing multiple credit card balances with varying interest rates and due dates is mentally taxing. Moving those balances into a single, structured personal loan simplifies your financial life to one monthly payment.
However, the mathematical success of this strategy depends on two factors: the new interest rate must be lower than the weighted average of your current card rates, and you must avoid using the cleared credit cards for new purchases. If you run up new balances on your cards while paying off the loan, you could end up doubling your total debt.