The average American household now carries roughly $6,500 in credit card debt, and at today's rates, minimum payments barely dent the balance.
That's why searches for debt consolidation loans have spiked again — and why so many borrowers are discovering the math isn't as simple as the ads suggest.
The Federal Reserve's rate hikes pushed average credit card APRs above 20%, the highest in decades.
A $6,500 balance at 22% costs you about $119 in interest every month if you're only paying the minimum.
Pay $200 monthly and you're looking at nearly four years of payments and over $2,800 in interest.
A debt consolidation loan promises an escape: one fixed payment, a lower rate, a payoff date.
Personal loan rates for good-credit borrowers currently sit in the 10% to 14% range.
On paper, swapping 22% for 12% saves real money — often $100 or more per month.
Most consolidation loans require decent credit, and if your score has already taken damage, you may only qualify for 18% or higher.
At that point, you've traded revolving debt for installment debt without solving the core problem.
Studies on consolidation consistently find that a chunk of borrowers run their credit cards back up within two years while still owing the loan.
Now they're carrying both balances — the original problem plus a new fixed payment.
Closing the paid-off cards helps, but it also lowers your available credit and can ding your score short-term.
Tapping a house to pay off cards converts unsecured debt into debt backed by your home.
The rate is lower, but so is your margin for error.
Miss payments on a credit card and you get late fees.
Miss payments on a HELOC and you can lose the house.
That trade-off deserves a long, honest look.
If you do pursue consolidation, a few rules separate the people who win from the people who tread water.
First, run the numbers on total cost, not monthly payment.
A lower payment stretched over seven years can cost more than the card you're replacing.
Second, get quotes from at least three lenders, including a local credit union — they often beat online lenders on rates.
Third, and most important, fix the cash-flow gap that created the debt.
If your budget still runs negative every month, the loan just buys you time before the same hole reappears.
Watch out for debt relief companies charging fees upfront or promising to "settle" your balances.
Legitimate consolidation is a loan, not a negotiation service.
Anyone asking for money before doing anything is a red flag.
The bigger picture: as long as card rates stay elevated, consolidation will keep looking attractive, and lenders know it.
That means more marketing, more pre-approved offers in your mailbox, and more pressure to sign fast.
Our take: a consolidation loan can be a genuinely smart move if you qualify for a meaningfully lower rate, commit to not reusing the cards, and fix the spending gap that got you here.
Skip any one of those three, and you're likely just rearranging the same debt into a new envelope.
Final Thoughts
Run the total-cost math yourself before anyone runs it for you.