Anyone carrying a credit card balance at 22% or higher should pay attention to what's happening in the personal loan market right now.
Average rates on two-year personal loans have drifted down through early 2025, and the gap between what banks charge on plastic versus what they charge on an unsecured installment loan has rarely looked this wide.
According to Bankrate's latest survey, the average two-year personal loan rate sits near 12.3%, while a five-year loan runs closer to 14.5%.
That's not free money, but it's a fraction of the 20%-plus APR most rewards cards charge.
For someone rolling $8,000 of revolving debt into a fixed-rate loan, the monthly savings can run into the low triple digits.
The catch is who actually gets those advertised rates.
Lenders reserve their best pricing for borrowers with credit scores above 720, steady income, and low existing debt loads.
Apply with a 640 score and you may see offers in the 18% to 25% range, which defeats the purpose.
This is why comparing prequalified offers from at least three lenders matters more than clicking the first ad that shows up in a search.
There's also a psychological trap worth naming.
Consolidating credit card debt into a personal loan only works if the cards stay at a zero balance afterward.
Plenty of borrowers wipe the balances, feel relieved, and then start swiping again within six months.
Now they're servicing a loan payment and a fresh card balance at the same time.
Where personal loans do make clean sense: funding a specific, one-time expense you've already priced out.
A $6,000 car repair, a medical bill, a modest home project.
You know the total, you know the term, and you can see the finish line.
Using one to fund ongoing lifestyle spending is where the math falls apart.
One more thing to check before signing: origination fees.
Some lenders tack on 1% to 8% of the loan amount upfront, which quietly raises your effective rate.
A 12% loan with a 6% origination fee is not really a 12% loan.
Ask for the APR, not the interest rate, and read the fee disclosure line by line.
Our take: personal loans are a useful tool when you're replacing high-rate debt with a fixed, dated payoff plan, and a bad idea when they become a slush fund for spending you haven't budgeted.
Final Thoughts
Run the numbers on total interest paid over the life of the loan, not just the monthly payment, before you commit.