Demand for Debt Relief Services on the Rise

Uptick in Debt Consolidation Services Reflects Mounting Consumer Financial Stress

As American households grapple with rising interest rates and the lingering impact of inflation, a growing number are turning to debt consolidation services in an effort to regain control of their finances. Industry experts report a sharp uptick in demand for these services, signaling increased financial strain among consumers.

According to data released this week by the National Foundation for Credit Counseling (NFCC), debt consolidation inquiries rose by 37% in the first quarter of 2025 compared to the same period last year. Financial advisors point to higher credit card balances, medical debt, and the resumption of student loan payments as primary drivers of the trend.

“Many consumers are carrying debt across multiple high-interest credit cards, and it’s become overwhelming,” said Linda Tran, a financial counselor based in Chicago. “Debt consolidation offers a way to simplify payments and, ideally, reduce the total interest burden.”

Debt consolidation typically involves combining multiple debts into a single loan—often with a lower interest rate—allowing borrowers to manage one monthly payment instead of juggling several. Services can range from personal loans and balance transfer credit cards to third-party debt management programs.

Online fintech platforms and traditional banks alike are reporting spikes in application volumes for personal loans aimed at debt refinancing. LendingTree, a popular financial marketplace, reported a 45% increase in debt consolidation loan searches since January.

Economic pressures appear to be at the root of the trend. Although inflation has cooled somewhat from its peak, everyday expenses—from groceries to utilities—remain significantly higher than pre-pandemic levels. Meanwhile, average credit card interest rates hover around 24%, making it harder for consumers to chip away at balances.

For some, debt consolidation can provide relief. But experts caution that it’s not a cure-all.

“Debt consolidation is a tool—not a solution on its own,” said Michael Greene, an economist with the Urban Financial Research Institute. “If spending habits don’t change or if borrowers take on new debt after consolidating, the cycle can repeat.”

Nonprofit organizations and credit unions are urging consumers to carefully vet any consolidation offers. Some services may come with hidden fees, longer repayment terms, or only provide temporary fixes.

In Washington, the Consumer Financial Protection Bureau (CFPB) has launched a public awareness campaign warning against predatory debt relief companies that promise instant solutions. “Consumers should be wary of any service that asks for large upfront fees or guarantees to erase debt,” a CFPB spokesperson said.

Despite these warnings, many see the rise in consolidation as a pragmatic response to growing financial pressures.

“With the right approach and guidance, debt consolidation can be the first step toward financial recovery,” said Tran.

As the economic landscape remains uncertain, Americans appear to be taking matters into their own hands—streamlining their debt and seeking stability in turbulent times.