More Americans are turning to personal loans and balance transfers to regroup mounting credit card debt — a tactic that can lower monthly costs but often fails unless spending habits change. With credit card balances near record highs, experts warn consolidation offers temporary relief unless borrowers address the root causes of overspending.
Credit card debt reached roughly $1.28 trillion at the end of 2025, according to the New York Federal Reserve, and everyday costs are squeezing household budgets. In response, many consumers are consolidating by shifting high-interest credit card balances into lump-sum personal loans or onto cards offering promotional rates.
When consolidation makes sense — and when it doesn’t
Personal loans deliver a fixed payment and a clear payoff schedule, typically over two to five years, which can be useful for people who want a predictable path out of high-interest credit card debt. According to Bankrate data, the average personal loan APR sits around 12.26%, compared with a credit card average of about 19.58%.
But the counseling community has seen more borrowers carrying personal loans. At Money Management International, the share of new clients with a personal loan on their credit report rose from 27 percent in 2020 to 40 percent last year, reflecting a broader shift in consumer borrowing patterns.
Still, experts caution that consolidation is not a cure-all. If underlying spending patterns remain unchanged, borrowers can find themselves back at square one — sometimes with additional fees or higher long-term interest costs.
‘A cycle that’s hard to break’
Research from TransUnion and other credit-data firms shows a common pattern: consolidators can sharply cut credit card balances in the short term, but many rebuild balances within a year or two. In one study, borrowers reduced card balances by a median of more than half after consolidation, yet a significant share regained prior levels within 18 months.
That experience mirrors what several borrowers report. One Navy veteran who consolidated multiple times described refinancing after a car crash derailed his repayment plan; his latest loan carries about a 19 percent rate and he says he now feels overextended despite repeated attempts to regroup.
Consolidation can stop interest from spiraling, but without changes in budgeting, stress management or the factors that drove the debt, it often only delays the problem.
Addressing the emotional side of debt
Financial counselors and therapists say focusing on numbers alone misses a big part of the solution. Rahkim Sabree, an accredited counselor, argues that emotional responses to money, plus the constant pressure to spend from marketing and promotions, play major roles in why people fall back into debt.
Helping clients remove shame and guilt around debt can make repayment plans feel more attainable. Counseling can also teach practical skills — such as identifying triggers, setting realistic goals and building buffers — that reduce the likelihood of returning to high-cost borrowing.
Nonprofit credit counselors can also negotiate with lenders to create a structured debt management plan, which may lower interest rates and spread payments over a longer, more manageable term.
Practical comparisons
| Tool | Typical APR (approx.) | Common term | When it helps |
|---|---|---|---|
| Personal loan | ~12% | 2–5 years | When you want a fixed payoff schedule and have decent credit |
| Balance transfer | 0% promotional, then variable | 12–18 months (promotional) | If you can pay off the balance before the promo rate ends |
| Credit cards | ~19.6% (average) | Revolving | Not ideal for long-term balances due to high interest |
| Debt management plan | Varies (negotiated) | Extended | For those who need creditor negotiation and structured repayment |
How to make consolidation work
There’s no single fix, but counselors recommend a few consistent steps:
- Take a full inventory of debts, interest rates and monthly cash flow.
- Choose a repayment tool that aligns with your ability to stick to a plan — stability beats a slightly lower rate you can’t maintain.
- Address spending triggers and build small emergency savings to avoid reborrowing.
- Consider nonprofit counseling if creditors need to be negotiated with or if you need help creating a sustainable budget.
In short, consolidation can reduce short-term costs, but its long-term success depends on behavior change, realistic planning and, when necessary, outside help. With rising household debt and tighter budgets, making those shifts matters now more than ever.
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Jordan Keller specializes in analyzing the US financial markets. With concrete recommendations, he helps you secure and boost your investments by providing strategies that adapt to market fluctuations.