U.S. consumers are piling up a mountain of debt, with American households adding $18.39 trillion in payable balances in the second quarter of 2025, according to the Federal Reserve.
Mortgages, credit cards, student loans, and auto loan debts were all up for the quarter, signaling potential trouble for cash-strapped U.S. households.
“This quarter’s flow of household debt into serious delinquency was mixed across debt types, with credit card and auto loans holding steady, student loans continuing to rise, and mortgages edging up slightly,” said Joelle Scally, economic policy adviser at the New York Fed, in a statement.
One way cashflow-challenged consumers can catch up to chronic debt is via a personal loan. As of Q2 2025, 24.8 million Americans hold such loans, up from 23.9 million a year earlier, according to Lending Tree, representing a 3.8 percent year-over-year increase.
Personal loans make sense for dealing with consumer debt, particularly if the borrower can secure low-interest loan terms and use the cash solely to pay down the debt.
“Personal loans are fairly common, though how easy it is to get one depends on the type of loan, your credit profile, and your overall financial health,” Leslie Tayne, a finance and debt expert and Founder of New York City-based Tayne Law Group, told NTD.
If you have good credit, a stable income, and little to no debt, getting a personal loan is absolutely feasible today, Tayne noted. “You can also increase your odds of being approved by taking out a secured loan, which is backed by collateral,” she advised.
Correspondingly, if you have poor credit, low or inconsistent income, or you’re carrying a lot of debt, it may be challenging to get approved for a personal loan. “Even if you are approved, it will likely be an expensive loan due to high interest rates and fees,” Tayne said.
Choose Carefully With Personal Loans
When is it advisable to use a student loan to pay off a personal loan? Debt experts say landing such a loan can be a good idea in these scenarios.
When you can cut into or eliminate interest payments.
Using debt to pay off other debt makes sense when you are lowering interest and/or payments. That amount should be substantial, given personal loan interest rates average about 12.2 percent as of October 2025.
“This can help your finances and budget and sometimes even help you pay off the debt sooner,” Ashley Morgan, an attorney and owner at Ashley F. Morgan Law, PC, told NTD. “Just make sure to budget properly. Paying off one debt with another can feel like an accomplishment, even if you haven’t really done anything but move debt from one loan to another.”
When you can bundle multiple debts into a single payment.
Consumers who are spreading debt across multiple household finance channels like mortgages, autos, and several credit cards can funnel all that debt into a single payment with a personal loan, ideally at a much lower interest rate.
When you can shop among different personal loan providers.
While Lending standards tightened a bit in 2025, borrowers with decent credit and income should still have options.
“That’s especially the case if you also include alternative lenders in the mix,” Chris Motola, financial analyst at National Business Capital, told NTD. Such lenders could offer personal lines of credit, peer-to-peer loans, or mortgage refinancing, which can provide cash for immediate debt issues, potentially with a lower interest rate.
Don’t Use a Student Loan to Pay Off a Personal Loan.
If you’re considering using student loan proceeds to erase a personal loan debt, think again.
While a personal loan can be used to pay for almost any expense, student loans have stricter requirements around how the funds can be used. “In general, student loans must be used to pay for education-related expenses, such as tuition, fees, housing, transportation, and other living costs,” Tayne said.
Though it’s rare for lenders to track how you’re spending your student loan funds, you’re taking a big risk. “If you’re caught misusing student loans, you could face penalties or even have the loan agreement terminated and the money demanded back,” Tayne added.
The views and opinions expressed are those of the interviewees. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.