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Debt consolidation can cut interest when a new loan rate is lower
With US consumers owing $1.26 trillion on credit cards as of mid-2026 and about 60% carrying balances monthly, consolidation hinges on securing a lower rate, since moving $15,000 from roughly 22% cards to a 10% five year personal loan can save about $6,000 to $8,000 in interest.
Benzinga says debt consolidation, which combines multiple debts into a single new loan or credit line, is often used to break the cycle of multiple credit card due dates, minimum payments, and high interest rates. The outlet notes Americans owed a collective $1.26 trillion on credit cards as of mid-2026, near an all time high, and that roughly 60% of cardholders carry a balance from one month to the next.
The outlet explains that consolidation does not erase what borrowers owe, but aims to make repayment cheaper and simpler. It works best when the new loan rate is below the weighted average rate of the existing debts, since the savings come from reducing interest costs rather than changing principal.
Benzinga highlights that one example involves $15,000 spread across credit cards charging around 22%. Citing Federal Reserve data, it notes the average rate on cards that carry a balance sat at 22.15% in the second quarter of 2026, and moving that amount to a five year personal loan at 10% could save roughly $6,000 to $8,000 in interest over the life of the loan.
The article also points to the payoff date as an important benefit, contrasting credit cards that can extend payments for decades with consolidation loans that include a firm end date. It adds that as of August 2026, the average personal loan rate was about 12.43% for borrowers with a 700 credit score, and it notes rate ranges from roughly 6% for excellent credit to 36% for the riskiest borrowers.