{"id":42022,"date":"2026-03-11T18:51:14","date_gmt":"2026-03-11T18:51:14","guid":{"rendered":"https:\/\/financialrush.com\/?p=42022"},"modified":"2026-03-11T18:51:14","modified_gmt":"2026-03-11T18:51:14","slug":"personal-loan-use-grows-as-consumers-tackle-high-rate-credit-card-debt","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=42022","title":{"rendered":"Personal loan use grows as consumers tackle high-rate credit card debt"},"content":{"rendered":"

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An increasing number of Americans are turning to balance transfers and personal loans<\/a> to consolidate and manage debt. It can save them money in the short term, but without a change in spending habits, that strategy is likely to fail, experts say.\u00a0<\/p>\n

\u201cIf they didn\u2019t fix whatever issues were causing them to overspend and charge on the credit cards in the first place, then they\u2019re just going to start charging again,\u201d said Jim Triggs, CEO of Money Management International, a nonprofit credit counseling firm. \u201cYou can never borrow your way out of debt. Eventually, you\u2019re gonna have to pay it and pay it off.\u201d <\/p>\n

Credit card balances<\/a> reached a record $1.28 trillion at the end of 2025, according to the New York Fed. And many consumers are struggling with higher everyday expenses<\/a>.<\/p>\n<\/div>\n

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More from Your Money:<\/h2>\n
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Here\u2019s a look at more stories on how to manage, grow and protect your money for the years ahead.<\/em><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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Personal loans, which provide a lump sum of money and are typically repaid over two to five years, can be a smart way to consolidate high-interest debt. Rates depend on the borrower\u2019s creditworthiness; the average is 12.26%<\/a>, versus 19.58%<\/a> for credit cards, according to Bankrate.<\/p>\n

Last year, 40% of new credit counseling clients at Money Management International had an existing personal loan on their credit report, up from 27% in 2020.\u00a0<\/p>\n

\u201cMost of the consumers that we see, we would consider middle class. They have jobs, they have debt, they have owned houses, and they\u2019re just struggling with debt.\u201d Triggs said.\u00a0<\/p>\n

A February forecast <\/a>from TransUnion, one of the three major credit reporting agencies, anticipates that unsecured personal loans will be the primary driver of new borrowing this year.<\/p>\n<\/div>\n

\u2018It\u2019s a never-ending cycle\u2019<\/h2>\n
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But, as Triggs said, consolidating debt isn\u2019t a cure-all.<\/p>\n

A 2023 TransUnion<\/a> study found that people who consolidated debt reduced their credit card balances by 57%, on average \u2014 but 18 months later, many borrowers had climbed back up to their previous level of debt. <\/p>\n

Historically, 14% to 17% of new personal loans have been used to refinance prior personal loans, according to TransUnion data provided to CNBC.<\/p>\n

That\u2019s been the case for Navy veteran Demetrius Thrasher, 38. He said he first took out a personal loan in 2022 to make ends meet and to consolidate car loan and credit card debt. He\u2019s refinanced multiple times, most recently in January, after a car accident upended his plans to pay off the debt. His latest personal loan carries a 19% interest rate.\u00a0<\/p>\n

\u201cIt\u2019s to the point now where I\u2019m just overextended,\u201d said Thrasher, a restaurant worker who recently returned to college in Atlanta in the hopes of landing a better job.\u00a0\u201cIt\u2019s a never-ending cycle, and I\u2019m ready for this cycle to be over.\u201d\u00a0<\/p>\n<\/div>\n

Removing the shame of debt<\/h2>\n
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Moon Safari | Istock | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Financial therapy can help some borrowers fix underlying issues that contribute to debt. \u201cDebt elimination is not just about the math,\u201d said Rakim Sabree,<\/a> an accredited financial counselor. <\/p>\n

How people respond to stress can help them break the cycle of debt, he said, and so can understanding the marketing and advertising systems designed to encourage spending. Once people have an understanding of the emotions around their spending, they can set realistic expectations for paying down debt.<\/p>\n

\u201cIt is helping people to remove the shame and the guilt of their situation so that they can now view the debt that they carry through maybe a more clear lens,\u201d Sabree said.<\/p>\n

The key to paying down debt is for the borrower to pick a strategy they can stick with \u2014 and then keep chipping away. \u201cThat change of behavior is not something that\u2019s going to happen overnight,\u201d Sabree said.\u00a0<\/p>\n

Non-profit debt counselors can help negotiate a debt management plan with creditors, which may reduce interest rates and extend the repayment term.\u00a0A personal loan, balance transfer or other tools may or may not be the right options as part of that bigger plan.<\/p>\n

\u201cConsumers should take a moment, look at the full picture and choose a solution that builds long-term stability, not just short-term relief,\u201d Triggs said.\u00a0<\/p>\n<\/div>\n

Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.<\/a><\/div>\n<\/div>\n\n
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