Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 6, 2012

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Using a credit card to pay off a personal loan is dependent on the situation of individual borrowers and lenders.

Many personal loan lenders operate online, and some solely exist online. These lenders are accustomed to processing payments electronically. While these lenders may accept personal loan payments via a mailed check or even by cash in person (assuming they have a physical business location), online and electronic payments are far more expedient. These online lenders usually do not care if they are paid via debit card, wire transfer, or credit cards.

Borrowers can better learn about the policies of individual personal loan lenders by speaking to their representatives or reading online information and comparing personal loan quotes.

While an online lender may be perfectly happy being paid with a credit card, not all lenders share this level of comfort.

For example, a borrower may have obtained a personal loan from a family member or friend. Making a payment may not be feasible or practical through the use of a credit card if a borrower’s lender is a friend or family member. In situations like these, lenders may demand that they be repaid with physical cash since not everyone has the capability to process credit cards for repayment. Similarly, some family members and friends may be hesitant to go through the process of a wire transfer between bank accounts for repayment.

If a lender is adamant about being repaid in cash then borrowers should be hesitant to use their credit card for a cash withdrawal. Credit cards typically carry high fees and interest on cash withdrawals since they are not intended to be used as ATM debit cards. Using credit cards in this manner to pay off personal loans will only land borrowers into deeper debt. In essence, this practice exchanges one problem for another.

Borrowers would be wiser to use their debit card or checking account to withdraw physical cash.

In the case of borrowers who are financially desperate or close to defaulting on payments for a personal loan, then speaking to their lenders may be the wisest course of action to take. While lenders are usually not pleased to hear a borrower is unable to make a payment, borrowers who show they are willing to try a payment plan can sometimes gain their lender’s sympathy.