When the edges of my towels start to fray I fold them over and sew them down with a zigzag stitch.
Recently, my husband used a new towel to clean up a caustic fluid that ate through it. I ended up with a new towel with some big holes in it.
I lay a washcloth on the larger spaces and cut around them. I then hemmed my “new’ washcloths. I got three washcloths and one hand towel out of that ruined towel.
You can also use a zigzag stitch around the washcloths if you don’t want to hem them.