3 big things to know before consolidating your debt this July

CBS News

08-07-2025

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If you're dealing with a lot of high-rate debt this July, debt consolidation could make sense, but it's important to do your homework first.
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If you've noticed that your credit card balances have been creeping higher recently, you certainly aren't the only one. Americans are carrying record levels of revolving debt right now, with the average cardholder owing just under $8,000. And, they're carrying that amount of debt at a time when the average credit card interest rate is hovering around 22%. Those higher balances and borrowing costs are having a big impact on people's finances, especially when coupled with still-high inflation.
That, in turn, has led debt consolidation to become an attractive option for those looking to reduce their monthly debt obligations. Consolidating your debt can be a smart financial move in nearly any economic landscape, as this type of debt relief allows you to combine multiple balances into one monthly payment, generally at a lower interest rate. By taking this route, you can save a lot of money on interest and pay off what you owe faster.
But while debt consolidation can pay off, it's not a decision to rush into. You still need to weigh your options and understand a few important things before jumping in. Below, we'll examine what you need to know before making your move this month.
Learn about the debt relief strategies you can use to reduce your balances now.
3 big things to know before consolidating your debt this July
Here's what you need to know about consolidating your debt this July before making your move:
Personal loans aren't the only option for consolidation.
When people think of debt consolidation, personal loans are often the first thing that comes to mind. But while a personal loan can be used for this purpose, these types of loans aren't your only choice. Balance transfer credit cards, for example, can also help you consolidate debt, especially if you qualify for one with a 0% introductory APR. These offers can give you 12 to 21 months on average with no interest, which means you can completely erase interest if you can pay off the balance within that window. Just watch out for balance transfer fees (typically 3% to 5% of the transferred amount) and make sure you have a solid payoff plan before the promo period ends.
Debt consolidation programs are another option, especially if your credit isn't strong enough to qualify for a low-rate loan or card. These programs, which are offered through debt relief companies, can help you secure a consolidation loan through the debt relief company's partner lenders. These loans are designed specifically for consolidating credit card debt and the lenders are accustomed to working with people who have minor credit issues, so they may be more accessible if you're struggling to qualify elsewhere.
Explore your debt relief options and start tackling your high-rate debt today.
The savings could be significant, even in today's rate environment.
One of the biggest perks of debt consolidation is the potential to save money. Credit cards currently average around 22% APR, which can add hundreds or even thousands of dollars in interest to your balance over time. But by rolling those balances into a different borrowing product, the savings could be substantial.
For example, right now, personal loan rates average about 12% for borrowers with good credit, so by rolling multiple high-rate cards into one loan with a rate at or near that rate, it could result in serious savings. Tapping into your home equity can also be a smart way to save when consolidating debt now, as rates on these products are hovering near 8% on average.
Keep in mind, though, that the rate you qualify for when borrowing depends on your credit score, income and other factors. If your credit isn't in great shape, your loan rate might not be low enough to make consolidation worthwhile. In that case, other debt relief options, like debt forgiveness or debt management, may be a better fit.
There may be a limit to how much (and the type of) debt you can consolidate.
Debt consolidation can be a great way to get rid of your debt, but it isn't an option for every type of account. Most debt consolidation loans and balance transfer credit cards are designed to let you tackle unsecured debts like credit cards, medical bills or personal loans. They won't allow you to include secured debts like car loans or mortgages in the equation, though.
There's also the question of loan limits when consolidating your debt. For example, lenders typically cap personal loans at between $50,000 and $100,000. If you have more debt than that, or if your debt-to-income ratio is too high, you may not qualify to borrow the amount you need. Even balance transfer cards come with limits based on your credit profile. So, if you're trying to consolidate a hefty amount of credit card debt with a balance transfer, you may have a tough time getting approved for the credit limit you need.
So, before applying, you may want to take stock of how much debt you want to consolidate and what type it is. If you're juggling a mix of secured and unsecured debts, or if your total balances are very high, you may want to explore debt relief programs or even talk with a credit counselor to map out a different approach instead.
The bottom line
Debt consolidation can be a powerful tool for getting your finances back on track, and the current rate environment offers genuine opportunities for savings, but success depends on choosing the right method for your situation and having a solid plan in place. And, as you work to chip away at what you owe, be sure to also take an honest look at the spending habits that got you here. Consolidation without behavior change will only lead to similar problems in the future, so it's important to take a holistic approach to your debt overall.