Financial advisors are currently discussing debt consolidation as a method for managing consumer debt. This approach involves combining multiple debts into a single loan with one monthly payment.
Bernadette Joy, a Bankrate expert contributor and founder of Crush Your Money Goals, commented on the practice. "Many people come to me after they've done debt consolidation and run into more debt because they didn't solve the root cause," Joy said. She recommends asking what will change once debt is clear as part of her CRUSH debt repayment method.
Joy added further advice for those considering consolidation. "Make sure you're not just moving the debt around without changing your habits," she stated. "If it helps you stick to your plan and reduces stress, great, but don't use it as an excuse to keep overspending."
Current data shows the average credit card interest rate is 19.64% as of January 2026. The average personal loan rate is reported at 12.19% for the same period. Rates can vary significantly based on credit scores, with some borrowers with excellent credit securing rates under 7%.
Potential benefits mentioned include lower interest rates compared to credit cards, faster debt repayment through fixed plans, and simplified finances with a single monthly payment. A fixed repayment schedule can also make budgeting easier, and timely payments may improve credit scores.
However, several drawbacks were noted. Upfront costs such as loan origination fees, balance transfer fees, and closing costs can accumulate. Borrowers with lower credit scores may not qualify for better rates and could end up paying more interest. Missing payments can result in late fees and damage to credit scores.
Bankrate analysis suggests consolidation offers a streamlined approach to credit repayment since loans come with set terms while credit cards do not. The same analysis indicates consolidation may not be advisable for those with low credit scores who cannot secure lower interest rates.
For those where consolidation isn't suitable, alternatives were mentioned. These include debt management plans with credit counselors, debt settlement negotiations, balance transfer credit cards with introductory 0% APR offers, and structured repayment methods like the snowball or avalanche approaches.
Experts emphasize that debt consolidation does not eliminate debt or solve underlying financial habits. They recommend tracking spending, creating realistic budgets, and building emergency funds to avoid relying on credit cards for unexpected expenses.