Does it make sense to use a line of credit to pay off credit card debt?

For example, if you use a line of credit to pay off your credit card debt, but then you start using the credit cards again, you’ll not only have to manage making your monthly payments on the line of credit, but also on your credit cards. In other words, a line of credit would cause you to accumulate more debt, which is totally counterproductive.

Consider a line of credit only if you are sure you’ll use it to pay for your existing credit card debt—not as a means to spend more or rack up more debt on your cards.

You’re not looking for additional credit anytime soon

A line of credit could impact your ability to secure additional credit, depending on how much money you borrow, whether you use it to pay off debt, and how quickly you pay back those borrowed funds. That’s because lines of credit affect your debt-to-income ratio (DTI) and credit utilization ratio, which makes up about 30% of your credit score. Having a high DTI and/or a high credit utilization ratio can limit your ability to acquire additional credit—such as a car loan or mortgage—in the future.

Alternatives to using a line of credit to pay off credit card debt

You deserve to feel confident about your finances and not stress about compounding interest. The best solution to credit card debt depends on your personal situation. 

As a first step, start a conversation with your bank or creditor. Tell them your situation and try to score one of these solutions: 

• Temporarily lower interest rates
• Credit card balance transfer
• Payment plan that works for you

And if that doesn’t work? You can contact a not-for-profit credit counselling agency that can provide you with free advice and a debt-relief solution that suits your needs and brings you peace of mind. 

This article is written by Anna Guglielmi, a certified credit counsellor and financial coach with Credit Canada. She is certified under Accredited Financial Counsellor Canada (AFCC) and the Bankruptcy and Insolvency Act (BIA).

Credit Canada is Canada’s first and longest-standing credit counselling agency. For more than 50 years, Credit Canada has been helping Canadians lead healthy financial lives, achieve their goals, and improve their quality of life through financial education and debt resolution. As a national, non-profit organization, Credit Canada has helped thousands become debt-free and achieve financial wellness.