Debt Consolidation Stats

How Common Is Debt Consolidation?

Debt consolidation is one of the most common ways people manage multiple debts. Research shows it’s a leading reason borrowers take out personal loans and tap into home equity: 

• About 70% of loans on two large online platforms, LendingClub and Prosper, were taken to consolidate debt.  
• In 2022, cardholders moved about $53 billion to new or existing cards with promo offers. 
• In 2024, 39% of home equity loan applicants said they wanted to consolidate debt, up from about 25% two years earlier. 
• Lenders made 6.3 million new unsecured personal loans in late 2024, and 24.6 million people had an active personal loan in early 2025. Not all of these were for consolidation, but the scale suggests many households use this route. 

Together, these trends show that debt consolidation is a mainstream way for people to manage what they owe.  

Fact: In late 2022, banks and credit unions held about 65% of fixed-rate personal loan balances, compared with just over 40% at finance companies. Nearly all FinTech personal loans were unsecured.

source: Federal Reserve

Personal Loans and Debt Consolidation 

Personal loans are a common way to combine high-interest debt into one fixed payment. Borrowers can qualify through banks, credit unions, or online lenders, and costs vary widely depending on credit score and lender type. 

• The average bank rate for a 24-month personal loan was 11.14% in August 2025, slightly lower than 11.57% a few months earlier. 
• Marketplace data, which includes many nonbank lenders, showed an average rate of 26.5% APR in June 2025. 
• Most lenders charge a fee of about 1% to 10% of the loan amount. This fee is often taken out of the funds before you receive them.  
• According to Federal Reserve data, the median loan length was about four years at banks and credit unions, three years at sales finance companies, and two years at personal loan companies.  
• As of late 2022, banks and credit unions held about 77% of personal loan balances, while finance companies held 23%. Fintech lenders accounted for roughly 14% of the market, often through partnerships with banks. 

These numbers show why shopping around matters. A borrower with good credit may qualify for a lower rate from a bank or credit union, while someone with limited credit history might only get offers from online lenders with higher APRs and shorter terms. 

Fact: About 89% of applicants with excellent credit scores (800–850 FICO) prequalified for personal loans on marketplace platforms, compared with less than 1% of those under 580.

source: Credible

Balance Transfers as a Consolidation Tool 

A balance transfer lets you move credit card debt from one card to another, usually to take advantage of a lower or 0% introductory interest rate. It’s one of the most common ways people consolidate high-interest credit card balances. 

• Balance transfers totaled $53 billion in 2022. 
• More than 98% of balance transfer volume in 2021–2022 came from prime, prime plus, and super prime borrowers—roughly those with credit scores above 660. 
• About half of Millennials and 61% of Gen Z cardholders who carry balances said they didn’t know about this option. That may be one reason most balance transfers are done by older borrowers with stronger credit. 
• In late 2022, the average balance transfer was about $6,000 for borrowers with very high credit scores (super prime and prime plus) and $4,700 for those with prime credit. 
• The average balance transfer fee was 2.8% of the amount transferred, and more than 95% of promotional offers included a 0% intro rate during 2021–2022. 

Balance transfers can be an effective way to lower interest and pay off debt faster, but they work best for people who qualify for 0% promotional offers and can pay off most or all of the balance before the intro period ends. 

Home Equity Loans for Debt Consolidation

Homeowners are increasingly using home equity loans to pay off high-interest debt. These loans let you borrow against the value of your home. 

In 2024, about 39% of home equity loan applicants said they wanted to consolidate debt. That’s up from roughly 25% two years earlier, showing that more people are using home equity to manage what they owe. 

A home equity loan can help reduce interest costs and make payments more predictable since most have fixed rates and longer terms. But because the loan is secured by your house, missing payments could put your home at risk. This option can make sense for homeowners with strong equity and steady income, but it requires careful budgeting and commitment to repayment. 

Borrower Outcomes After Consolidation

Debt consolidation can help people lower interest costs and simplify their payments. Data also shows short-term credit improvements after consolidation, though lasting results depend on spending habits. 

• After consolidating credit card debt with a personal loan, borrowers cut their card balances by about 57% on average. 
• Median credit utilization—the share of available credit being used—fell from 59% to 14% right after consolidation. 
• Within 18 months, many borrowers rebuilt some of their card balances, with median utilization climbing to 42%. This shows that long-term results depend on controlling new spending. 

These findings suggest that consolidation can improve short-term financial health but doesn’t guarantee lasting relief. Keeping balances low and avoiding new debt after consolidating are key to maintaining progress. 

Fact: Borrowers who consolidate credit card debt typically see an average credit score increase of about 18 points shortly after consolidating, but many rebuild balances within 18 months.

source: TransUnion

Alternatives to Debt Consolidation

Debt consolidation can make payments simpler, but it’s not the only way to manage what you owe. If you don’t qualify for a consolidation loan or prefer not to take on new credit, there are other ways to regain control: 

• Debt management plans: Nonprofit credit counseling agencies can combine multiple debts into one monthly payment, often at a lower interest rate. 
• Creditor negotiations: Some lenders offer hardship plans that temporarily reduce payments or interest. 
• Budget changes: Small steps like trimming subscriptions or setting spending limits can free up cash to pay down debt faster. 
• Debt settlement programs: Reputable companies may negotiate lower payoff amounts if you’re behind on payments. 
• Bankruptcy: When debt is unmanageable, Chapter 7 or Chapter 13 bankruptcy may offer a legal path to start over.