Debt consolidation loan vs. debt consolidation program: Which will be better in 2025?

While inflation has cooled significantly compared to recent highs, many Americans are still burdened by high consumer goods costs caused by years of high inflation, especially at gas stations and grocery stores. Housing, insurance and transportation costs have also increased over the past year, adding to the financial pressure. 

As a result, many people are turning to high-rate credit cards to get by. The average credit card interest rate is currently sitting above 23%, so many cardholders are seeing their balances grow at a faster rate than they can pay them off. 

If you're looking for ways to lower your interest rate and pay down credit card debt in 2025, there are two options you may want to consider: debt consolidation loans and debt consolidation programs. To understand more about how these options work and how borrowers can choose which is best, we asked experts to weigh in.  

Speak with a debt relief expert about your options today.

Why a debt consolidation loan may be better in 2025

When you take out a debt consolidation loan, the goal is to roll multiple credit card balances into one loan, ideally at a lower rate. This streamlines all of your debts into one monthly payment, and if you're able to secure a lower interest rate, it offers the opportunity to pay down the balance faster, and with less interest, over the life of the loan. 

"A debt consolidation loan is ideal for someone whose debts are annoying but not scary," says Howard Dvorkin, a personal finance expert and chairman of Debt.com. "For instance, if you earn a good income but run up your credit cards during the holidays, a debt consolidation loan can save you a lot on interest. Instead of paying 20% on several credit cards, you take out a personal loan at 10%."

However, you'll need a good credit score to qualify for a low interest rate. And if your credit card debt is a result of excessive spending, a debt consolidation loan won't do anything to fix the underlying issue. 

"A debt consolidation loan can be a smart move if you're serious about getting out of debt, not diving deeper into it," says credit coach Jeanne Kelly. "What matters most is discipline. If you free up those credit cards and go back to using them, you'll be right back where you started." 

Dvorkin adds that if your financial situation worsens, it's easy to fall behind on your debt consolidation loan — so it's important to weigh both the benefits and potential downsides of this option. 

"I've seen it before — someone gets a debt consolidation loan, but then they're laid off. Or they get into a car accident. Maybe they get sick. Now they can't make those steep monthly payments, and the loan goes into collections," Dvorkin says. "Now they're worse off than they were before."

Find out more about debt consolidation and your other debt relief options here.

Why a debt consolidation program may be better in 2025

A debt consolidation program is a service offered by debt relief companies that works similarly to a debt consolidation loan. Rather than applying for a debt consolidation loan on your own, though, you work with the debt relief company to obtain the loan from one of their third-party partner lenders, which is then used to consolidate your debt. 

The main benefit of a debt consolidation program is that the third-party lenders these debt relief companies work with tend to be more flexible in terms of lending parameters. That means you may qualify to borrow with a lower credit score or a few credit report blemishes, which could be difficult if you take the traditional debt consolidation route.

Dvorkin says a debt consolidation program can also be beneficial for individuals with a lot of debt who need one-on-one help. 

"Think of your debt like it's your taxes. If your taxes are manageable, you can fill out the forms yourself. But once they get complicated, you save more money by going to a tax professional to file those forms for you," Dvorkin says. 

Given the more flexible lending parameters, though, the loan you get through a debt consolidation program could come with a higher rate compared to a traditional debt consolidation loan. Still, if the rate is lower than what you're currently paying on your credit cards, it could be a smart option to consider in 2025 — especially if you're unable to qualify for a traditional debt consolidation loan due to a high debt-to-income ratio or other credit-related issues.

The bottom line

If you're on the fence about debt consolidation loans and debt consolidation programs, there are other debt relief techniques you can try. If your debt is so extreme that you're unable to repay it, Dvorkin says you may want to consider debt settlement, which could reduce your current balances by 30% to 50% in certain cases. 

"It's less serious — and less expensive — than bankruptcy. It will hurt your credit score, but doing nothing will hurt your credit score even more," Dvorkin says.

If your credit card debt is manageable but you want to reduce interest charges, you can transfer your debt to a balance transfer card with a promotional 0% APR. These promotional periods usually last between 12 and 21 months, and they allow you to pay off your debt faster since you don't have to worry about interest accruing during the promotional period. 

Regardless of the method you choose, though, Kelly says it's important to identify what you can change about your behavior so you don't wind up in debt again. "This isn't just about paying off debt — it's about building a sustainable plan for long-term financially healthy credit."