The Federal Reserve has cut the federal funds rate for the second time this year, a move analysts anticipated amid sluggish job growth, higher unemployment and stubborn inflation.
On Wednesday, the Federal Open Market Committee reduced its benchmark rate by 25 basis points to a range of 3.75% to 4.00%. Early signs point to a third rate cut this year when the committee meets again in early December.
A lower-rate environment isn’t great news for savers, who’ve been enjoying higher yields on savings accounts and CDs, but it’s a blessing for Americans climbing their way out of debt.
With back-to-back quarter-percentage-point rate cuts in September and October, debt consolidation loans can be particularly helpful to consumers struggling with credit card bills, personal loans, auto financing and other debts.
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Annual Percentage Rate (APR)
Eligible borrowers can qualify for a lower interest rate and combine multiple debts into a single streamlined monthly payment, with your lender often paying your creditors directly. In the case of an auto loan, debt consolidation also removes the risk of repossession.
Terms typically range from one to seven years, though some lenders offer longer options. A longer term means lower monthly payments, but you’ll be charged more in total interest over time. So, experts advise choosing the shortest term you can afford.
“If they can reduce any high-interest loans that they have — credit cards, personal loans or car loans — then there might be an opportunity to refinance their current loans and open up a higher monthly cash flow,” said Dana Menard, founder and lead financial planner for Twin Cities Wealth Strategies. “Or just completely eliminate debt altogether, which is always a better option.”
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Accredited Debt Relief has helped clients pay off over $3 billion in debt over the span of 13+ years. They are a great option for people with more than $20,000 in debt.
Thanks to inflation, Menard added, “a lot of debt has been brought on personal balance sheets over the last year.”
As of the second quarter of 2025, U.S. credit card debt stood at a record $1.21 trillion, an increase of $27 billion from the previous quarter.
With the average monthly car payment racing past $750, auto loan delinquencies, defaults and repossessions have also increased in recent months.
Paying off high-interest debt in a lower-rate environment should be done before putting money in savings or investing, Menard said. The average credit card interest rate, for example, is 24.19% — surpassing any gains you could expect to see in the market.
“Especially this close to the holidays, when spending starts ramping up again, it’s good to kill high-interest debt as fast as you possibly can,” Menard added.
Fed rate cut: The smart money moves for investors
Victoria Fernandez, chief market strategist at Crossmark Global Investments, says investors are now facing a high-risk bull market.
“We want to be cautious on where we invest,” she told CNBC Select. “We are looking for companies with strong cash flow, solid earnings and the ability to withstand a potential slowdown in the economy.”
Two areas Fernandez likes are big banks and the health care sector, including biotech firms. This strategy can be combined with high-yield fixed-income investments, such as U.S. Treasuries or investment-grade corporate bonds, to provide a steady cash flow.
If you’re worried about tariffs driving up inflation, Fernandez said, consider Treasury Inflation-Protected Securities (TIPS), a type of T-bond whose principal value is adjusted to keep pace with price increases.
Avoid meme stocks, junk bonds and commodities whose prices can fluctuate quickly and put money at risk, she added. Once reports begin to show improvement in jobs and inflation, you can be more aggressive.
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Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Dana Menard, founder and lead financial planner of Twin Cities Wealth Strategies. Dana is a Certified Financial Planner with over 20 years of experience advising professionals, business owners, entrepreneurs and families on both immediate and long-term goals.
We also spoke with Victoria Fernandez, the chief market strategist at Crossmark Global Investments. Victoria joined Crossmark in 2012 and is also responsible for managing the Crossmark Fixed Income Investment team while serving as portfolio manager for taxable fixed income products. She has appeared on Bloomberg, CNBC, Fox Business and Yahoo Finance.
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