You paid off one credit card, then watched the progress stall everywhere else on your list. So you started shopping around for something that would combine what’s left into a single, predictable payment. You’re not the only one. A record share of Americans opened a personal loan this year, many chasing the same fixed payment and lower rate you’re looking for. Here’s what’s actually driving the surge, and how to tell if a personal loan would help your situation or just move the same debt somewhere else.
Why Personal Loan Debt Is Climbing Right Now
Personal loan debt has grown every year since 2017, and 2025 pushed that trend to a new high. Thirty-eight percent of U.S. consumers now hold a personal loan, and 67.5 million personal loans currently show up on credit reports, up 7% from 63.2 million the year before, according to Experian’s 2026 personal loan usage data. Hard inquiries for new personal loans jumped 16% over the same period, a sign that more people are actively applying, not just carrying loans they took out years ago.
The dollar totals tell the same story. Combined personal loan balances reached $597.6 billion in 2025, up 7.6% from $555.2 billion in 2024. Unsecured personal loans, the kind most people use to consolidate credit cards or cover a large expense, grew to $207.1 billion. The average personal loan balance sits at $19,333, and that number has stayed fairly stable since 2023, which suggests lenders are approving larger loans rather than more small ones.
What’s Actually Driving the Surge
Two forces are pushing personal loan debt higher at the same time. The first is the Federal Reserve’s rate cuts, which lower the cost of new personal loans and make borrowing feel more affordable than it did a year or two ago. The second is what’s happening on credit cards. The average credit card now charges an APR above 22%, and credit card balances nationwide climbed to a record $1.26 trillion in 2026. When a card’s rate outpaces what a personal loan would cost, moving that balance into a fixed-rate loan starts to look like the more disciplined choice, not a shortcut.
Forty-two percent of consumers say they’re more likely to take out a personal loan in 2026 because of these economic conditions, per Experian’s research. When people are asked why, the most common answers are major purchases, emergency expenses, home improvements, vacations, and consolidating existing debt, particularly credit cards. That last reason carries the most weight for anyone already working through a payoff plan, since it turns several bills with different due dates into one.
How a Personal Loan Stacks Up Against Credit Card Debt
Credit cards are revolving debt. The balance can grow every time you use the card, the minimum payment is calculated to keep you paying for years, and the rate can change. A personal loan works differently. You borrow a fixed amount, get one fixed rate, and pay it off over a set term with the same payment every month. That structure is exactly why so many people move credit card balances into a personal loan in the first place.
The tradeoff is that a personal loan is still debt, and taking one out only helps if the math actually works out lower once fees are included. Delinquency on personal loans has held steady at around 4% for loans 30 or more days past due, well below the 6.97% of credit card balances that are 90 or more days past due, but still far from risk-free. Before you sign anything, it’s worth reading about when to consolidate your debt to see whether your credit score, your rate offer, and your reason for the original debt line up with what makes consolidation pay off.
Signs a Personal Loan Will Actually Help
A personal loan tends to help when three things are true. Your credit score is strong enough, generally 670 or above, to qualify for a rate meaningfully lower than what you’re currently paying. You understand what caused the original debt, so the cards you’re paying off don’t quietly refill while the new loan payment sits on top. And the total cost, including any origination fee, comes out lower than continuing to carry the debt where it is now.
It stops helping when any of those breaks down. A personal loan that stretches your repayment term out for the sake of a smaller monthly payment can end up costing more in total interest, even at a lower rate. And a personal loan taken out to free up room on a credit card, without a plan to stop using that card, usually just adds a new payment next to a balance that starts climbing again.
How to Take Out a Personal Loan Without Adding to Your Debt
Start by checking rates with several lenders using prequalification tools that only run a soft credit pull, so shopping around doesn’t ding your score before you’ve chosen anything. Compare the full APR and any origination fee side by side, not just the monthly payment, since a longer term can make a worse loan look cheaper on paper.
Once the loan funds, pay off the specific balances you intended to consolidate immediately, and put those cards away rather than closing them outright, since closing an account can affect your credit utilization. Build the new fixed payment into your budget the same week the loan closes, and choose the shortest term you can comfortably afford. A personal loan only reduces your debt if it replaces what you owed, instead of becoming one more payment layered on top of it.
Frequently Asked Questions About Personal Loan Debt
Is Personal Loan Debt a Sign of Financial Trouble?
Not by itself. A personal loan with a clear purpose, like consolidating higher-rate debt into one fixed payment, is a common and often reasonable financial tool. It becomes a warning sign only when you use it to cover new debt on top of balances that never actually got paid down.
What Credit Score Do I Need for a Personal Loan?
Lenders generally reserve their best rates for borrowers with a credit score of 670 or above. Options exist for lower scores too, often through credit unions or online lenders, but expect a higher rate that narrows how much the loan actually saves you.
Will a Personal Loan Hurt My Credit Score?
Applying triggers a temporary dip from the hard inquiry, and opening a new account can briefly lower your average account age. Making on-time payments afterward tends to help your score over time, particularly by adding a fixed installment loan to a credit mix that’s mostly revolving.
Is a Personal Loan Better Than a Balance Transfer Card?
It depends on your timeline and discipline. A balance transfer card can offer 0% interest for 12 to 21 months, but the rate jumps once that window closes. A personal loan locks in one rate and one payoff date from day one, which some people find easier to plan around.
How Much Personal Loan Debt Is Too Much?
There’s no single number, but a useful check is your debt-to-income ratio. If your total monthly debt payments, including the new loan, climb above 35% to 40% of your take-home pay, the loan adds more strain than it relieves.
Final Thoughts
Personal loan debt is climbing for a reason that makes sense on paper. When credit card rates sit above 22%, and a fixed-rate loan offers something lower, consolidating looks like the responsible move, and often it is. What determines whether it actually works is what happens after the loan funds. Pay off what you meant to pay off, leave the old cards alone, and build the new payment into your budget like it’s the only one you have. That’s what turns a personal loan into real progress instead of one more bill.
Photo by Jakub Żerdzicki: Unsplash