Are you drowning in multiple monthly payments? You’re not alone.
61% of Americans carry an average credit card debt of $5,875, and managing multiple high-interest debts can feel overwhelming. Personal loans for debt consolidation offer a practical solution that millions of Americans have already found success with.
35% of those who took out a personal loan did so to consolidate their debt, making it one of the most common reasons people choose personal loans as a financial option.
What Is Debt Consolidation?
Debt consolidation combines multiple debts into one single monthly payment. You use a personal loan to pay off existing debts, then repay the new loan with fixed monthly payments over a set term.
This strategy works best when you can secure a lower interest rate with the personal loan than what you’re currently paying.
When Should You Consider Debt Consolidation?
Personal loan debt consolidation makes sense if you:
- Carry balances on multiple credit cards
- Pay high interest rates (above 15% APR)
- Struggle to manage multiple due dates
- Want predictable monthly payments
- Have good to excellent credit (typically 650+ credit score)
Benefits of Using Personal Loans for Debt Consolidation
Lower Interest Rates Save You Money
Credit card interest rates remain painfully high. The average interest rate on a 24-month commercial bank loan rose from 8.73% in spring 2022 to 12.33% currently in 2025. Personal loans still offer significant savings when it comes to interest rates compared to credit cards.
Personal loan interest rates average about 7% lower than credit cards for the same borrower.
Real Example: You have $10,000 in credit card debt at 24% APR. Making minimum payments of $250 monthly, you’ll pay over $15,000 in total interest.
With a 5-year personal loan at 12% APR, you’d save approximately $8,000 in interest charges.
Simplified Payment Management
Having to manage just one payment beats juggling five credit card bills. You’ll know exactly:
- When your payment is due
- How much you owe monthly
- When you’ll be debt-free
Most personal loans offer repayment terms from 2 to 7 years, giving you flexibility to choose monthly payments that fit your budget.
Credit Score Improvement
Using a personal loan to pay off debt could boost your credit score by 80-plus points after just one month, according to a recent LendingTree study.
Here’s why your credit score improves:
- Credit utilization drops immediately when you pay off credit cards
- Payment history becomes more consistent with one fixed payment
- Credit mix improves by adding an installment loan
Potential Drawbacks to Consider
Your Total Debt Doesn’t Disappear
Debt consolidation doesn’t reduce the total amount you owe. It simply reorganizes your payments. You still need to commit to paying off the full amount.
The real benefit comes from lower interest rates and just one payment to manage.
Not All Lenders Offer the Same Terms
Shop around and consider your options before choosing a lender. Interest rates, fees, and terms vary significantly between:
- Traditional banks
- Credit unions
- Online lenders
- Peer-to-peer platforms
Possible Upfront Costs
Some lenders may charge additional fees that can add to your total cost:
- Origination fees (0% to 8% of loan amount)
- Application fees
- Late payment penalties
- Prepayment penalties (less common)
Always clarify all fees before signing any loan agreement.
How to Succeed with Debt Consolidation
Address the Root Cause
It’s important to understand why or how you accumulated debt in the first place. Common reasons include:
- Overspending on discretionary purchases
- Lack of emergency savings
- Medical expenses
- Job loss or reduced income
One thing you should do while you resolve your current debt is to create a budget and start planning an emergency fund to prevent future debt accumulation.
Avoid New Credit Card Debt
To maintain your financial progress, focus on keeping your credit cards paid off and avoid adding new balances. Consider:
- Closing some credit card accounts
- Removing cards from your wallet
- Setting up automatic savings to build an emergency fund
Make Payments on Time
Late payments can trigger penalty rates and damage your credit score. Set up automatic payments to ensure you never miss a due date.
Current Market Conditions for 2025
Interest rates remain elevated compared to recent years, but they may decline later in 2025. The Federal Reserve cut interest rates three times in 2024 — the first time since 2020 — with another two cuts forecast in 2025.
Nearly half (48%) of credit card holders carry a balance, according to Bankrate’s 2025 Credit Card Debt Report, showing that debt consolidation remains relevant for millions of Americans.
Is Debt Consolidation Right for You?
Ask yourself these questions:
- Can you qualify for a personal loan with a lower interest rate than your current debts?
- Will you commit to not accumulating new credit card debt?
- Do you have steady income to make consistent monthly payments?
- Would one payment be easier to manage than multiple payments?
If you answered yes to these questions, debt consolidation might be a great option to help you regain control of your finances.
Take the Next Step with Credit Direct
Ready to explore your debt consolidation options?
Credit Direct makes the process simple and straightforward. Our network of over 25 trusted lenders means you get access to competitive rates and terms.
Why choose Credit Direct:
- Check offers with no effect to your credit score
- Quick application process
- Funding as soon as 24 hours
- Personal loans up to $40,000
- Simple, secure, and straightforward lending process
Don’t let multiple high-interest debts control your financial future. Check your personalized offers today and see how much you could save.
Sources
- LendingTree. “Personal Loan Statistics: 2025.” Retrieved June 2025.
- The Motley Fool. “Personal Loan Statistics for 2025.” March 19, 2025.
- Bankrate. “Bankrate’s 2025 Credit Card Debt Report.” April 9, 2025.
- U.S. News. “Personal Loan Statistics and Trends to Watch in 2025.” December 30, 2024.
- LendingTree. “2025 Credit Card Debt Statistics.” Retrieved June 2025.
- CNBC. “Nearly half of credit card users are carrying debt, report finds.” January 10, 2025.
- DocuClipper. “29 Credit Card Debt Statistics For 2025 That You Should Know.” March 18, 2025.