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Debt Consolidation

Fixed vs. Variable Interest: What’s Better When Consolidating Debt?

Written by Lauren Hamer, CFEI®
Senior Content Writer
November 12, 2025 | 8 min read
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If you’re looking to pay off high-interest debt and exploring the idea of debt consolidation, you’ll need to choose between a fixed and variable interest rate. While the ideal option will depend on your unique situation and risk tolerance, opting for a fixed-rate option is more common because it creates a predictable payment schedule and ensures that your payments will stay the same.

Below, we’ll dive deeper into the differences between a fixed and variable interest rate as well as the benefits of debt consolidation for high earners.

Why interest type matters in debt consolidation

 

Consolidation is about control

There are two main benefits of debt consolidation: reducing the number of payments you need to track and the potential to get a lower interest rate. Consolidating multiple debts into a lower-rate personal loan gives you more control over your finances because it often means substituting variable-rate debt with fixed-rate financing. Not only does this ensure your interest rate doesn’t change, but it can also lower your monthly payments, reduce interest charges, and improve your cash flow over time.

The key to sustaining this type of control? Choosing the right interest structure for your loan.

 

High-income ≠ immune to debt traps

It’s not uncommon for six-figure earners to carry significant debt. High earners often juggle large mortgages, high tax burdens, and student loans.

They also tend to hold their assets in stocks, bonds, retirement accounts and real estate, which poses liquidity constraints. As a result, many professionals tend to lean on credit cards and other forms of financing to make ends meet. Carrying debt from month to month can quickly spiral out of control, especially if the balances are tied to high, variable-rate options like credit cards.

What is fixed interest?

When you take out a loan with a fixed interest rate, the rate you agree to at the beginning never changes. This means your monthly payments remain steady throughout the life of the loan, making it easier to plan ahead and stay on top of your finances.

 

How it works

Unlike variable interest rates, which can vary based on based on market fluctuations, a fixed rate is locked in when you sign your loan agreement. Your payment will stay the same even if the prime rate changes, helping you avoid surprises in your budget.

 

Benefits of fixed interest

Since a fixed interest structure locks in your rate and payments from the moment you finalize your loan, you can accurately predict your monthly expenses in advance and budget accordingly. Fixed interest is a huge plus if you’re concerned about rising market interest rates and prefer greater financial stability. It’s also ideal if your income varies based on business revenue, bonuses, and/or commissions.

What is variable interest?

A variable interest rate changes over time, often based on market benchmarks like the prime rate or an index set by lenders. That means your payments can rise or fall depending on how rates shift during your repayment period.

 

How it works

Variable rates adjust periodically—sometimes monthly, quarterly, or annually—depending on your loan terms. When your rate goes up or down, your monthly payment adjusts with it, which can make budgeting less predictable.

 

Risks of variable interest

Variable interest loans can offer lower starting rates than fixed loans, which may reduce your initial payments. They also give you the chance to save if market rates drop, since your rate could decrease over time. However, the biggest risk is unpredictability. Variable rate loans don’t allow you to calculate your total loan cost in advance, making long-term financial planning a real challenge. Additionally, you might discover that increasing loan payments eventually outweigh the benefits of debt consolidation.

Fixed vs. variable: A side-by-side comparison 

Here’s a closer look at how fixed and variable interest rates compare:

 

Fixed interest

Variable interest

Monthly payments

Predictable

Can fluctuate

Budgeting

Easier

More challenging

Total interest paid

Potentially higher at first

Potentially lower early on

Risk of payment shock

Low

High if rates rise

Stability in rising market

Strong

Weak

What the data says 

The average APR on all credit card accounts was 21.39% as of August 2025, according to the Federal Reserve. By comparison, average personal loan APRs range from 11% to 15% for borrowers with good credit. The difference in interest can result in significant savings. As such, fixed-interest rate loans tend to be more popular for borrowers who are looking for smart financing solutions. Roughly 72% of personal loans taken in 2023 had fixed rates, proving borrower preference for predictability.  

 

FYI: BHG Financial’s personal loans for debt consolidation come with a fixed rate and industry-leading extended terms1 to help keep monthly payments low.

 

Discover how much you could save

For high earners, predictability is power 

 

Cash flow management matters

The stakes are higher for professionals with higher monthly obligations and complex finances. Even small unforeseen rate hikes from variable rate loans can create ripple effects, pulling funds away from investments, business growth, or family needs. Choosing a predictable structure helps manage cash flow and preserve the wealth you’ve worked so hard to build.

 

Asset-rich ≠ cash-rich

Even if you own a lot of assets, such as a home, business, or investments, it doesn’t always translate to readily available cash. Preserving liquidity means opting for financing that avoids volatility, especially if you have irregular cash inflows or significant overhead costs.

Why BHG personal loans are fixed—and why that matters

BHG Financial understands the unique needs of high earners with complex financial situations. We offer fixed-rate loans that allow for predictable payments with no surprises. With us, you can enjoy:

  • Higher loan amounts and no collateral: While other lenders limit how much you can borrow from as low as $1,000 to around $100,000, we offer loans up to $250,000.1 Plus, there is no collateral required. 
  • Flexible repayment terms: We’ll work with you to design a repayment schedule that aligns with your particular budget. BHG personal loans offer extended repayment terms of up to 10 years.1,2
  • Easy application: With BHG, you can pre-qualify for a personal loan in minutes, without any effect on your credit score.3 Our knowledgeable U.S.-based concierge team is here for you throughout the application process.
  • Fast funding: Upon approval, you may receive your funds in as few as 5 days.4 You won’t have to wait long to tackle your debt and/or pursue other financial goals. 

Final takeaway: Choose fixed for stability and simplicity

If you’re searching for a strategic way to consolidate debt and regain financial control, a fixed interest rate is almost always the better option, especially in a high-rate economy. You’ll be able to shift away from multiple payments to one streamlined payment, simplifying your financial life, reducing monthly strain, and enjoying a great deal of peace of mind in the process.

Ready to see what’s possible? Use our quick and easy payment estimator to get your personalized loan offer in just seconds.4

* Potential savings based off comparing repayment of a $50,000 balance over 7 years on both a credit card with a minimum monthly payment of $1,233 and APR of 23.99% (average consumer credit card APR per Investopedia as of 8/05/25), with the assumption no additional draws on the line are made during this time; and a BHG Personal Loan with a minimum monthly payment of $894 and minimum available APR for a 7-year term, which is 12.44% as of 10/21/2025 and includes an origination fee.

 

Not all solutions, loan amounts, rates or terms are available in all states.

1 Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile.

2 Personal Loan Repayment Example: A $59,755 personal loan with a 7-year term and an APR of 17.2% would require 84 monthly payments of $1,228.

3  There is no impact on your credit for applying. For personal loans, a complete credit history, which will appear as an inquiry on your credit report, will be performed upon acceptance and funding of the loan and may impact your credit.

4 This is not a guaranteed offer of credit and is subject to credit approval. 

Consumer loans funded by Pinnacle Bank, a Tennessee bank, or County Bank. Equal Housing Lenders. 

For California Residents: BHG Financial loans made or arranged pursuant to California Financing Law license - Number 603G493.

 

 

 

If you’re feeling weighed down by credit card debt, you’re not alone. High interest rates can feel like an uphill battle, making it easy to fall behind and tough to catch up. 

Understanding how to pay off credit card debt is the first step toward taking control of your debt and reclaiming your financial well-being. Here are a few practical strategies to eliminate credit card debt.

 

Key considerations

  • If you have a significant amount of high-interest debt and a good credit score, a debt consolidation loan can be a viable option for paying off credit card debt. For smaller debts, a balance transfer card could help you tackle debt faster.
  • If not consolidating or using a balance transfer card, set a goal and a budget for repayment; targeting one debt at a time using the snowball or avalanche method can help reduce your balances methodically.
  • Gradually exceed monthly minimum payments whenever possible to decrease your total interest over time. Even small extra payments can make a big difference in your credit card debt over the long term.

 

Why is credit card debt hard to pay off?

U.S. credit card balances have surpassed $1.21 trillion, according to the Federal Reserve, driven partially by high APRs.

Credit card debt is difficult to overcome. Even if you don’t make additional purchases, the interest compounds. Only paying the minimum each month means you will carry the debt from month to month, increasing your debt as you accumulate interest charges.

For example, if you’ve amassed $50,000 in credit card debt on a card with a 23% APR, you could pay up to $11,500 per year in interest. Without a plan in place to address the debt proactively, it can become a significant burden. 

To start, pay as much as you can toward the debt. Some common ways to do this effectively and consistently include using the debt snowball or debt avalanche method. 

 

What is the debt snowball method?

If you have balances on multiple cards, one of the best strategies to eliminate credit card debt is the snowball method. With the debt snowball method, you pay off the card with the smallest balance first before moving on to the next largest one.

This method is a good choice if you can’t afford to make large monthly payments but want to proactively chip away at your debt. Once you pay off a card, you'll redirect the funds you were using for that payment to your next card balance. You'll continue to do this until you’ve tackled each debt.

Here’s how it looks in action, using the following credit card balances as an example:
 

  • Credit card 1: A $5,500 balance and an APR of 16%
  • Credit card 2: A $2,000 balance and an APR of 20%
  • Credit card 3: A $10,000 balance and an APR of 23%

 

Using the snowball method, you’d focus on the second card on this list first because it has the lowest balance ($2,000). Once cleared, you’d move on to the next highest card balance ($5,500) before addressing the third card with a $10,000 balance. 

Remember to make minimum payments on all other cards in the meantime; missing any minimum payment can hurt your credit score.

 

What is the debt avalanche method?

Attacking debt using the debt avalanche method involves paying off the account with the highest interest rate first, regardless of the balance. It can take a while to make progress on —especially if the balance on that card is excessive—but you’ll save money on interest in the long run. 

The avalanche method may be a better strategy for you if you can confidently afford a bigger payment and want to pay less in interest while you work to become debt-free. 

Here’s how debt avalanche looks in action, using the same credit card balances from above as an example:
 

  • Credit card 1: A $5,500 balance and an APR of 16%
  • Credit card 2: A $2,000 balance and an APR of 20%
  • Credit card 3: A $10,000 balance and an APR of 23%

 

Using the avalanche method, you’d tackle the third card first because it has the highest APR (23%). You’d focus on the second card next—APR of 20%—even though it has a lower balance, before moving on to the first card with the lowest APR. 

Again, it’s important to focus on making every payment on time to protect your credit score and avoid tacking on additional late fees. It can take a while to knock out the first debt, so patience and consistency is key.

 

How can debt consolidation help? 

Consolidating personal credit card debt FAQs

Consolidating personal credit card debt can simplify your finances by combining multiple debts into a single monthly payment with more manageable interest rates. In the long run, this can save you from spending more money than you anticipated or previously agreed to on in-terest payments in the future.

Personal debt consolidation can impact your credit score differently depending on the method chosen. For example, applying for a new loan or credit card for consolidation may result in a temporary dip in your credit score due to inquiries, changes in credit utilization, and your his-tory using credit-based financial products. However, making timely payments on the consoli-dated debt can positively affect your credit score by demonstrating responsible financial man-agement.**

Yes, personal debt consolidation can be applied to various types of debt, including personal loans, medical bills, and student loans, in addition to credit card debt. Consolidating multiple debts into a single payment can streamline your repayment process and make it easier to man-age your finances overall.

With highly specialized financing options for accomplished professionals, BHG Financial offers personal loans up to $200K1 to use as you need them. With repayment terms that last up to 10 years,1,2 you can fully bring your financial plan to action by consolidating your personal debts into a simple and affordable monthly payment to help you achieve financial peace of mind sooner rather than later.

Our payment estimator can help you see your personalized estimate quickly, and our dedicated concierge service team can serve your needs every step of the way.

 

Debt consolidation involves combining multiple credit card debts into one new account or loan and using it to pay off your existing debts. In many cases, consolidation can save you money because the new product may come with a lower interest rate than the ones attached to your cards. Consolidating debt also simplifies the repayment process because you only need to manage one monthly payment.

Some of the most effective credit card consolidation strategies include using a debt consolidation loan or a balance transfer credit card. The best way to pay off credit card debt will depend on the amount of debt you have, your credit history, and your income level.

If you have a significant amount of high-interest debt and a respectable credit score, a lower-rate personal loan for debt consolidation can be a viable option. Debt consolidation loans, like the ones offered by BHG Financial, have flexible repayment terms1 that help keep your monthly payments low.

 

Do balance transfers help pay off debt faster?

Transferring your balance from one credit card to another can help you pay your debt faster, as long as the new card comes with a lower rate. If you transfer your balances to a new card with a lower APR, you can allocate a greater portion of your future payments to paying down the principal instead of the interest.

That said, there are a few things to know about the timing of balance transfer credit cards:

  • You can apply for a balance transfer card in a matter of minutes, but the actual transfer can take anywhere from a few days to several weeks, depending on the credit card company. During that time, you’ll still have to make any payments you owe to your original card company.
  • Make sure you understand how long the introductory rate lasts, whether there’s a transfer fee, and what the regular rate will be after the promotional period. Introductory rates typically run for a period of six to 18 months, and if you can’t pay off your balance in full, the new rate may be higher than the rate on your old card. 

If you worry it may take longer than the intro period to pay off your debt, consider transferring your balance to a debt consolidation loan. BHG offers fixed, affordable payments with terms up to 10 years.1,2 Plus, dedicated loan specialists provide a concierge loan experience, guiding you through the loan process. 

 

 

Balance transfer vs personal loan chart


Source: Bankrate, Investopedia - Accessed on 3/14/25
1 Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile.

 

How to pay off credit card debt FAQ

 

Should I pay off my credit card debt or save first?

It usually makes sense to pay off your debts before saving money, especially if you have high-interest debt. This is because the high interest rates on your accounts will often cost more than the money you can save. For this reason, any money you can afford to save is better allocated to paying off your high-interest debt so that it doesn’t continue to compound. 

 

How can negotiating with creditors reduce my debt?

If card issuers are willing to consider negotiating your credit card debt, you may be able to set up a payment plan, pay off the cards for less than what you owe, or agree to a forbearance. However, there are definite drawbacks to negotiation, as these solutions negatively impact your credit score.

 

Can I pay off credit card debt without hurting my credit score?

Absolutely! Any moves you make to pay your monthly balances on time can help build a solid payment history and, in turn, improve your credit score. Plus, reducing your credit card balances will lower your credit utilization ratio.

 

Are debt relief programs worth it?

Debt relief (debt settlement) programs offered by for-profit companies should be viewed as a last resort, and only after you’ve exhausted options for consolidation. Debt relief companies can fast-track getting out of debt, but they often charge high upfront fees, and the process could hurt your credit score. Watch for scams and make sure you understand the potential fees before handing over your finances to a debt relief company.

 

What if I can't afford minimum payments?

Many creditors are willing to work with you if you cannot afford to pay the monthly minimum payment. Call the company as soon as possible to see what you can work out. If getting a debt consolidation loan isn’t an option for securing a lower minimum payment, you can contact a credit counseling agency, which will help you organize a debt management plan to pay down your debts. Debt relief programs could be considered as a last resort, as they come with drawbacks and can charge exorbitant upfront fees.

 

How BHG can help you pay off debt faster

At BHG Financial, we believe financing should fit seamlessly into your life and goals. That’s why we offer personal loans tailored to your needs, with amounts up to $200,0001 and flexible terms of up to 10 years.1,2 Consolidate your high-interest debt with a BHG loan designed to help you move forward confidently. 
 
Plus, you’ll enjoy dedicated, U.S.-based concierge service that works around your schedule—because your time is valuable. Ready to see what’s possible? Use our quick and easy payment estimator to get your personalized loan estimate in just seconds.