Pay Off Loan with Credit Card? Escape Debt Stress (2026)

Many Australians find themselves juggling multiple financial commitments, from personal loans to credit cards, and wonder if they can simplify their finances by using a credit card to pay off a loan. This is a common query, especially when managing high-interest loans. While it might seem like a quick fix, understanding the implications and exploring the options is crucial to making an informed decision.

Understanding Paying Off Loans with a Credit Card

At first glance, using a credit card to pay off a loan might seem like an easy way to consolidate debt or take advantage of lower interest rates, especially when promotional offers are involved. However, it's vital to comprehend how this process works and the potential consequences.

Most lenders do not allow direct credit card payments to settle a loan. This is primarily because credit cards are a form of unsecured debt, while most loans are secured, meaning they have collateral backing them. However, you can use alternative methods, such as balance transfer offers or cash advances, but these come with their own sets of rules and risks.

Current Market Information: Rates, Requirements, and Options

As of 2026, credit card interest rates in Australia range between 6.49% and 22%, depending on the lender and the card type. Balance transfer offers can sometimes provide 0% interest for a specific period, usually between 6 to 24 months. However, these offers often come with a balance transfer fee, which can range from 1% to 3% of the amount transferred.

Option	Interest Rate	Other Fees
Standard Credit Card	6.49% - 22%	Annual fees may apply
Balance Transfer	0% for 6-24 months	1% - 3% transfer fee
Cash Advance	18% - 25%	Cash advance fees apply

Eligibility for these offers usually requires a good credit score and a demonstrated ability to manage existing debts. Lenders will assess your credit history, income stability, and debt-to-income ratio before extending such offers.

Steps to Pay Off a Loan with a Credit Card

To effectively use a credit card to pay off a loan, follow these steps:

1. Review Your Loan Terms: Confirm if your loan allows for early repayment without penalties. Some loans have exit fees or penalties for early payoffs.
2. Check Your Credit Card Offers: Look for balance transfer options that offer low or 0% interest rates for a period long enough to pay off your loan balance.
3. Calculate the Costs: Consider any transfer fees and ensure that the cost of using the credit card is less than the interest saved on the loan.
4. Apply for the Balance Transfer: If eligible, apply for the balance transfer with your credit card provider. Ensure you have all necessary documentation ready.
5. Execute the Transfer: Once approved, execute the transfer to pay off the loan. Monitor this process closely to ensure no issues arise.
6. Plan Your Repayment: Create a repayment plan for the credit card balance to ensure it is paid off before the promotional rate ends, avoiding higher interest rates.

Expert Tips and Considerations

• Understand the Risks: Using a credit card can be risky if not managed properly. The interest rates after a promotional period can be significantly higher than those of a personal loan.
• Stick to a Budget: Ensure you have a solid budget in place to avoid accumulating more debt on your credit card while paying off the loan.
• Consult with a Professional: Consider speaking with a mortgage broker from Esteb and Co, who can provide tailored advice and access to over 83 lenders, ensuring you choose the best option for your situation.
• Be Aware of Credit Score Impacts: Applying for new credit or balance transfers may impact your credit score, so it's essential to factor this into your decision-making process.

Frequently Asked Questions

1. Can I pay off any loan with a credit card?

No, most lenders do not allow direct credit card payments for loans. Alternative methods such as balance transfers or cash advances might be required.

2. Are there any penalties for paying off a loan early using a credit card?

This depends on your loan terms. Some loans may have exit fees or penalties for early repayment, so it's crucial to check your loan agreement.

3. What happens if I can't pay off my credit card balance after a balance transfer?

If you don't pay off the balance before the promotional period ends, you may face high-interest rates, often between 18% and 25%, on the remaining balance.

4. How does using a credit card to pay off a loan affect my credit score?

It can impact your credit score both positively and negatively, depending on how well you manage repayments and your overall credit utilization ratio.

5. What are the benefits of using a balance transfer to pay off a loan?

The primary benefit is the potential to save on interest payments, especially if you secure a 0% rate for a certain period.

6. Can Esteb and Co help with loan repayment strategies?

Yes, Esteb and Co's experienced brokers can provide guidance and access to a wide array of lenders to help you find the best repayment strategy for your needs.