Carrying High-Interest Debt? 5 Reasons 2025 Is the Year To Consolidate It
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Carrying high-interest debt can feel like a huge burden if you’re only able to make minimum payments. It can be painful to watch that accumulated interest grow while your principle remains untouched.
If you’re just not getting ahead, sometimes it’s necessary to take the next step: debt consolidation. If you’ve been thinking about consolidation, 2025 may be the right year for you to do so.
The Sooner the Better
For anyone who relied too heavily on their credit cards to get through the last few years and whose balances are now threatening to overwhelm their family’s budget, it’s always a case of the sooner the better, according to Martin Lynch, president of the Financial Counseling Association of America (FCAA).
“Don’t let your financial challenges go on without creating a plan to deal with them. Don’t start missing payments before you reach out, and don’t suffer alone, hoping a miracle will happen.”
Interest Rates Won’t Likely Drop Much More
While The Federal Reserve has made two rate cuts this year, it’s uncertain that it’ll do so again in 2025 if inflation ticks up, Lynch said.
“Either way, the needle for credit card interest rates probably won’t move dramatically, so the option to consolidate debt will still have significant appeal to many consumers who want to repay what they’ve borrowed but can’t afford to do so at 24% interest,” he said.
Lynch’s organization as well as others like it offer free debt counseling to help people review their options without obligation.
Because Credit Card Interest Is High
If you’re carrying high-interest debt, most likely on your credit cards, these are some of the easiest debts to consolidate, Lynch said.
“The balances may be high, but it’s their high interest rates that make these an attractive target for this approach.”
He clarified one distinction, however, that consolidation loans and consolidating debt through a nonprofit credit counseling agency are two different strategies. They both share a common goal of responsible debt repayment, however, and they’re both safer alternatives to debt settlement, which can tank your credit score.
You Have a Good Credit Score You Want To Keep
If your credit score is above 700 in 2025, you can likely qualify for a consolidation loan at a better rate than you’re paying on your credit cards, allowing you to save money while paying down those balances, Lynch shared.
“In this case, the total amount of your balances isn’t a key factor because you’re simply using the proceeds of one loan to repay your accounts,” he said.
He did offer two key suggestions if you’re considering a consolidation loan: First, you don’t want to close the credit card accounts you’re paying down. Keep them open. Second, if you take out the loan and keep your credit cards open, you have to correct the behavior that caused you to ring up those high balances in the first place.
“You won’t have accomplished much if you don’t change the way you use credit,” he said.
You’re Ready To Negotiate Your Debts
If you don’t want to take out a consolidation loan and you’re prepared to consolidate your debts through a nonprofit credit counseling agency like the FCAA, you may be able to lower the interest rates on the accounts the agency helps you enroll, Lynch said.
“In our approach, the accounts you include in your Debt Management Plan are closed, so you cannot continue to run up your balances. That’s actually a fair trade-off, because most major creditors are actually very generous to clients who go through a counseling agency,” he said.
Their average client has between five and six credit cards at interest rates of around 24%. With the agency’s help, they can reduce those rates to an average of just 7%, allowing consumers to save a significant amount every month while they pay down their balances.
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