Debt has a way of making one feel stuck in an endless cycle, but paying it off doesn’t always have to be a slog. Personal loans can be used as a tool to reduce the interest on debt and create a structured payoff timeline. Here are some things to consider about using a personal loan to pay off debt.
Paying Off Debt With a Personal Loan
To pay off debt with a personal loan, you generally apply for a loan and, if you’re approved for the loan, use the loan proceeds to pay off the old debt. But there are a few things to consider in this process:
- You might want to apply for multiple personal loans to find the best terms — consider these tips if you’re worried multiple applications might hurt your credit score, or apply for a pre-approval since that only involves a soft credit check
- It’s important to know if the loans you’re applying for can cover the amount of debt you’re trying to consolidate or refinance
- Once you have a loan, you should strive to pay in full and on time and avoid accruing new debt — especially if the debt you’re paying off is a credit card
Pretty simple, right? If you have any questions about how to use the loan proceeds to pay off the old debt once you’re approved for the loan, your lender can generally help you figure it out. Many make it as simple as filling out a form and waiting for the refinance to be complete.
Looking to consolidate debt with a personal loan? Make sure your credit is in good shape and fix errors before you apply with Upturn Credit’s FREE tool!
How to Compare Personal Loans
Since the goal here is to use a personal loan to pay off debt, it’s important to get the best terms possible — with “best” meaning the lowest overall cost. These are the costs to compare:
- Origination fee
- Interest rate
- Late fees
- Prepayment penalty
The biggest factor in your cost is usually going to be the interest rate, though you shouldn’t discount the origination fee, as that can add a large chunk to your balance. Prepayment penalties can also end up costing you a lot if you pay off your loan early. Consider this if you think you might want to pay your loan off before the end of the term.
You’ll also find that there are options for fixed interest rates and variable rates, and that variable rates usually have the lowest starting APR. Although a lower interest rate is ideal, the unpredictability of a variable interest rate is something to think about. If you choose a variable rate loan, make sure your budget will be able to handle an increase in your monthly payment should the rate go up.
Finally, you might notice that some personal loans also offer a variety of repayment terms, with some having a longer payoff period and thus lower monthly payments. Lower monthly payments can be useful for anyone struggling to make ends meet, but they’re not as good for someone seeking fast debt payoff. If you fall into the latter camp, remember that a shorter repayment term means becoming debt-free sooner and, depending on the interest rate, a lower overall cost.
Where to Get a Personal Loan
You can easily find and compare personal loans by going to your local banks and credit unions, and by doing some research online. That said, be cautious online as some personal loan offers should come with a scam warning.
Be aware, for example, of something called “Advance-Fee Loan” scams that ask you to pay an upfront fee for guaranteed credit approval (after which you never hear from them again). You can see warning signs to be aware of in this list from the Federal Trade Commission, and watch out for red flags by remembering that legitimate lenders don’t tend to guarantee credit approval.
While we’re at it, we decided to examine some of the best personal loans that can be found regionally in the United States. Read on to find some of the best personal loans in multiple cities.
Some of the Best Personal Loans in the United States¹
You can try online personal loans no matter where you live in the United States — but if a local lender is what you want, there are still plenty of options to choose from. We looked at personal loan options in a few different American cities and found a number of credit unions that offer personal loans with competitive interest rates.
This list is focused on credit unions because they’re known for their focus on the local communities they serve, but you can also find personal loans online and at your preferred local or larger banks. All rates listed here are current as of April 2019.
Some of the Best Personal Loans in Atlanta
- CDC Federal Credit Union
- Started for employees of the Centers for Disease Control and Prevention, now serves employees of these companies and “those who live, work, worship, attend school or volunteer in portions of DeKalb, Fulton or Gwinnett counties.”
- Personal loan rates: 5.50% minimum
- On the Grid Financial
- Created for employees of the Georgia Power Company Atlanta Division, On the Grid Financial is now open to employees of the electric utility industry who live in the following states: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia.
- Personal loan rates: 7.24% minimum
- Delta Community Credit Union
- Delta Community was founded by a handful of Delta Airlines employees. It now serves a variety of people and relatives of people who live and work in multiple Georgia counties as well as employees of various companies and community organizations, all of which can be found here.
- Personal loan rates: 7.25% – 17.50%
- Credit Union of Georgia
- Originally a credit union for teachers and faculty in the local schools, Credit Union of Georgia now serves a variety of people in Georgia. You can check the full list here to see if your work, family, or residence makes you eligible.
- Personal loan rates: 7.74% minimum
- Platinum Federal Credit Union
- Platinum Federal Credit Union was founded to serve the Shia Imami Ismaili Muslim Community and continues to serve all members of this faith throughout the United States.
- Personal loan rates: 7.99% minimum
For more of some of the best personal loans in Atlanta, read here.
Some of the Best Personal Loans in Houston
- Texas Dow Employees Credit Union (TDECU)
- Created by a small group of Dow Employees, TDECU now says it’s the largest credit union in Houston. You can scroll down to the bottom of this page to see if you qualify for membership.
- Personal loan rates: 3.74% minimum
- KBR Heritage Federal Credit Union
- Employees of Halliburton, KBR, and KBR Technology Center and their families can join KBR Heritage Federal Credit Union.
- Personal loan rates: 6% minimum
- Members Choice Credit Union
- Members Choice Credit Union serves people in CyFair, Katy, and West Houston. You can view a list of zip codes the credit union serves here.
- Personal loan rates: 6.39% minimum
- CTECU is a credit union for Chevron employees in Texas and Chevron annuitants.
- Personal loan rates: 6.75% minimum
- First Service Credit Union
- First Service Credit Union merged with Brownbuilder Federal Credit Union in 2010. Since the merger, the credit union expanded from a credit union for Brown & Root employees and family to the communities of Harris County, Fort Bend County, and Waller County, as well as Conroe ISD and Magnolia ISD.
- Personal loan rates: 6.99% – 16.99%
For more of some of the best personal loans in Houston, read here.
Some of the Best Personal Loans in San Antonio
- Synergy Federal Credit Union
- Opening its doors as Valero Federal Credit Union aligned with Valero Energy Corporation, Synergy FCU is now available for people who work at the following companies (and their families): CST Brands, NuStar Energy, Pearson, Tesoro Corporation, and Valero Energy Corporation. You can email or call them at firstname.lastname@example.org, 210-345-2222, or 888-272-8228 to see if you might be eligible to join.
- Personal loan rates: 7.90% minimum
- Randolph-Brooks Federal Credit Union
- This credit union was originally formed to serve military service members and families but now serves civilians as well and has 55 branches across Austin, Corpus Christi, Dallas, and San Antonio. You can call 1-800-580-3300 to see if you might qualify for membership.
- Personal loan rates: 8.50% minimum
- Navy Federal Credit Union
- Men and women who serve in all branches of the armed forces and their families can join Navy Federal Credit Union and remain members throughout their lifetime. Department of Defense civilians are also allowed to join, and you can learn more about membership requirements here.
- Personal loan rates: 8.19% – 18.00%
- Generations Community Federal Credit Union
- Generations began as a credit union for employees of the City of San Antonio, San Antonio Fire Department, and San Antonio Police Department and their families. The credit union now serves the following communities: Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina, and Wilson County.
- Personal loan rates: 8.25% minimum
- Air Force Federal Credit Union (AFFCU)
- AFFCU was formed by a group of service members at Lackland Air Force Base but has since grown to serve more than 47,000 members around the world. For example, membership is now open to service members in Arkansas, Louisiana, Mississippi, Oklahoma, and Texas, along with other personnel.
- Personal loan rates: 8.50% minimum
For more of some of the best personal loans in San Antonio, read here.
¹This list of loans is provided for informational purposes only. Upturn does not endorse any particular loan or have any relationship with the lenders. You should review all product information carefully before applying for any loan.