$10,000 of credit card debt at today's average card rate costs about $3,659 in interest if you pay it off over three years. Move the same debt to an average personal loan and the interest drops to about $1,854.
That's the promise of "debt relief." The catch is that the phrase covers three very different products, and one of them can make things worse before it makes anything better.
Why this matters right now
Americans owed $1.28 trillion on credit cards at the end of 2025, and 7.13% of card balances slid into serious delinquency during that quarter (New York Fed). Banks charged an average 21.52% on card accounts that paid interest, versus 11.40% on 24-month personal loans (Federal Reserve, G.19).
That 10-point gap is why ads for debt relief are everywhere. Let's decode them.
Option 1: Debt consolidation
What it is: you take one new loan, usually a personal loan or a balance transfer card, and use it to pay off several debts. Then you make one payment.
What it can do: cut your interest rate and simplify your bills.
Watch out: the CFPB notes that once you add the loan's length, fees and costs, you could end up paying more overall than with your original debts (CFPB). And consolidating with a home equity loan puts your house on the line if you miss payments (FTC).
Option 2: Credit counseling and a debt management plan
What it is: a counseling organization, usually a nonprofit, reviews your budget and may set up a debt management plan. You send it one payment a month, and it pays your creditors.
What it can do: creditors may agree to lower interest rates or waive some fees. The goal is a lower monthly payment, not a smaller balance (CFPB).
Watch out: it takes discipline. The FTC says a plan can run 48 months or longer and only works if every payment is on time (FTC).
Option 3: Debt settlement
What it is: usually a for-profit company that tries to get your creditors to accept a lump sum smaller than what you owe. You save that lump sum in an account first, often for months.
What it can do: in some cases, shrink the balance.
Watch out, seriously: settlement companies often tell you to stop paying your creditors while you save. Late fees and penalty interest pile up, collection calls ramp up, and your credit takes a hit. The CFPB adds that these companies can't guarantee how much you'll save, and usually can't get a better deal than you could negotiate yourself (CFPB; FTC).
Run the numbers
$10,000 paid off over 36 months:
| Stay on cards at 21.52% | Personal loan at 11.40% | |
|---|---|---|
| Monthly payment | $379 | $329 |
| Total interest | $3,659 | $1,854 |
| With a 5% loan fee ($500) | $2,354 |
Illustrative: average rates from the Fed's G.19 report; your offer depends on your credit. The 5% fee is an example. Check the actual origination fee.
Even with a fee, consolidation wins in this example by about $1,300. But only if the cards stay paid off. Run them back up and you've doubled the debt.
Fee check
- Consolidation loan: look for an origination fee, often taken out of the loan before you get the money.
- Balance transfer card: usually a transfer fee, plus a 0% period that ends. Know the date and the rate after it.
- Debt management plan: may carry setup and monthly fees. Ask for every fee in writing.
- Debt settlement: fees are typically a share of the debt that gets settled. Under federal rules, companies selling debt relief by phone can't charge you until they've actually settled or reduced a debt ( FTC ). Anyone asking for money upfront is a red flag.
Which one fits?
- Decent credit, steady income, debt spread across cards: consolidation, if the math beats your current rate including fees.
- Payments feel impossible, but you can pay something every month: start with a nonprofit credit counselor.
- Debt settlement: treat it as a last resort, and only after you understand the credit damage and fees.
Do this today: list every debt with its balance and APR in one place. You can't pick the right fix until you can see the whole problem.
Sources
- Consumer Financial Protection Bureau, What is the difference between credit counseling and debt settlement, debt consolidation, or credit repair?
- Federal Trade Commission, How To Get Out of Debt
- Federal Reserve, G.19 Consumer Credit , April 7, 2026
- Federal Reserve Bank of New York, Household Debt and Credit Report, Q4 2025 , February 10, 2026
Rates, fees and offers change often and depend on your credit and the lender. This article is for general information, not individual advice.