Some 40 percent of U.S. adults said paying down debt is their largest expected expense in 2026, according to a recent survey from the National Endowment for Financial Education.
“The reason why the right debt consolidation plan matters is simply because the wrong plan can increase the cost of the debt and make it a lot harder to pay it back,” Baynes told The Independent in an email.
“The right plan should be based on the stability of the borrower’s income, how quickly they need to pay off the debt and whether they need budget flexibility.”
The Independent spoke with financial experts to identify three top debt consolidation options: credit card balance transfers, personal loans and home equity loans. Each option is typically available through a bank, credit union or online lender.
Credit card balance transfer
Credit card balance transfers often provide low- or no-interest debt consolidation with a short repayment timeline of typically up to 18 months, Baynes said.
“You can find many options that offer 0 percent interest for 12 to 18 months, and they’re best for those who have high-interest credit card balances,” he said. “Using them can help you stop interest from increasing while you pay down the balance.”
While it’s common to open a new credit card, an existing card might offer a balance transfer promotion, too. They typically have a transfer deadline, restrictions on the type of debt you can transfer (credit card debt is typically allowed) and charge a fee ranging from 3 percent to 5 percent of the transferred balance.
Considering that the median credit card limit was only $5,100 in the third quarter of 2025, according to the Federal Reserve Bank of Philadelphia, a balance transfer is ideal for consolidating smaller debts but can work for bigger debts if a borrower’s credit limit allows.
Also, a 0 percent interest rate may save on monthly payments, but that rate can end if a payment is missed or the balance isn’t paid off before the promotional period ends.
Personal loan
Personal loans provide a lump sum of money that can be used for nearly any purpose, including paying off debts. Typically, personal loans have a fixed monthly payment, set repayment period and have lower interest rates than credit cards, which is one of their advantages.
For example, the average interest rate on a two-year personal loan was 11.65 percent near the end of 2025, while the average credit card interest rate was 20.97 percent, according to the Federal Reserve’s most recent data.
A personal loan may be the best debt consolidation method for those who want the stability of fixed payments and a set repayment schedule, according to Jeffrey Hensel, broker associate at California-based short-term lender North Coast Financial, Inc.
“Personal loans…offer set monthly payments for predictable long-term budgeting for anyone with steady income,” Hensel told The Independent in an email. “In my experience, this means not [dealing with] the shock of [the] varying rates credit cards are often associated with.”
Lenders set personal loan limits that are more generous than those for most credit cards. For example, the average borrower with a good credit score may have a combined $25,000 credit limit across all credit cards. Personal loans, on the other hand, have limits of up to $100,000, according to Credit Karma, if borrowers have sufficient income, a good credit score and an acceptable debt-to-income ratio.
Additionally, loan terms often range from 12 to 60 months or longer, according to Rocket Loans, giving borrowers flexibility for their payoff plan. However, since a longer term means more interest paid over the life of the loan, consider a loan that balances a reasonable repayment period and interest rate.
Also, be aware that some lenders charge a fee for processing loan applications. Known as “origination fees,” they can be as high as 8 percent or 10 percent of the loan amount. Shop around for lenders that waive this fee and offer competitive rates to maximize your savings.
Home equity loan
Home equity loans may be a good fit for homeowners with sufficient equity – the difference between a home’s value and its mortgage balance – and who need to consolidate a large amount of debt. Rates for home equity loans tend to be much lower than personal loans and credit cards.
Like a personal loan, a home equity loan typically offers predictable monthly payments with a fixed interest rate and repayment period. However, term options are often up to 20 or 30 years, which can lower monthly payments.
However, home equity loans used for debt consolidation carry a significant risk, said certified financial planner Eric Croak, president of Ohio-based Croak Capital. Home equity loans require the house as collateral.
“If you’re consolidating credit cards with home equity, you better believe you have the willpower of a Navy SEAL,” Croak told The Independent in an email. ”You have just secured your debt. Meaning, if you start missing payments, the bank has a right to [foreclose on] your house.”
Considering the high stakes and impact on a home’s equity, Croak recommends using a home equity loan for debt consolidation only under certain conditions.
“Use a home equity loan to lock in a fixed rate, create a five-year window to pay yourself off, and cut up the [credit] that got you into debt in the first place,” he said. “Otherwise, you’ve just created an ATM for yourself attached to your house…and sooner or later, you’ll run out of money (and equity).”
Lastly, be prepared for a longer, more involved application process. In addition to submitting thorough documentation, borrowers may have to get a home appraisal and pay closing costs of 3 percent to 6 percent of the loan amount, according to Rocket Mortgage.