Today’s Financial Message Just for you, {{ first name | friend}}
Remember when you could pay off your credit card with one paycheck? Gen X invented "creative financing"—juggling multiple credit cards like we were contestants on Double Dare.
Debt consolidation can turn that chaotic mess into one manageable monthly bill at a lower rate.
Instead of playing whack-a-mole with five different due dates and interest rates that would make a loan shark blush, you streamline everything into a single payment that actually makes a dent… Continue Reading
According to a recent CNBC Select article, of all the generations (Gen Z, Millennials, Gen X, Boomers and the Silent Generation) Gen X was carrying the highest debt load in 2025.
The bad news? The average debt balance is about $158,000.
The good news? We were one of the three generations who dropped our number from our average debt balance in 2024 - by 0.8%, or $1,285.
It doesn’t sound like much, but it shows that a lot of us are taking advantage of opportunities, tackling the financial obstacles we’re all facing (Whether we inherited them or not) and making smart decisions to get out of the tricky economic hand we’ve been dealt.
That said, there are always options to reduce our debt even further - and not just by finally getting that promotion you were promised three years ago, or selling everything in your garage.
If you’re looking to shrink your own household debt - and especially if you’re carrying multiple types of debt, like credit cards, a car loan, student debt, etc. - you should seriously consider the path of debt consolidation.
How Do You Know If You Should Consolidate Your Debt?
The answer will differ from person to person, because it really depends what your particular financial challenges are.
Debt consolidation in theory is simple - combine all of your debts into one new loan for one payment, ideally at a lower interest rate.
Sounds great, right? It definitely can be, but - debt consolidation isn’t the best option for everyone. The benefits heavily favor people with good to great credit scores and also depend very much on where interest rates lie.
Also, and maybe most importantly - it also relies on you committing to pay off the debt and not get back into the same boat you jumped out of.
Factor #1. You Don’t Necessarily Save Money
Debt consolidation will normally save you money.
However, the extent to which debt consolidation can help you will depend on your credit score.
If your credit score is high enough, you should be able to qualify for low-interest debt consolidation loans. This is a much better option to missing credit card payments, which can trigger interest charges of 19.99% or higher in many cases.
When you qualify for better rates than your current credit provides, debt consolidation can save you money. However, this isn’t always the case.
It isn’t unheard of for debt consolidation to cost more than the borrower’s previous debts.
If lenders view you as not being creditworthy, they’ll place higher demands on you. Debt consolidation loans often require collateral. Read: They need you to add something to the deal in case you don't pay back the new loan.
If you don’t have good credit and reasonably low debt, you can expect to be asked to provide collateral, such as properties and vehicles.
Factor #2. Your Credit Score Can Go Either Way
Taking a debt consolidation loan has both positive and negative effects on your credit score.
Applying for debt consolidation requires a hard credit pull. This has a small negative effect on your credit score. Sending multiple formal applications is not recommended for this reason.
Apart from your application, the opening of a new credit account also has a temporarily negative effect. However, this can be reversed if you handle your debt consolidation loan as intended (Don't miss your payments.).
Debt consolidation offers no guarantees, only your actions do.
Factor #3. Success Has Requirements
Debt consolidation can be your light at the end of the tunnel.
But you still need to travel through the darkness to get to the light.
Like other loans, debt consolidation comes with a repayment schedule. The consequences of your actions regarding debt consolidation are similar to any other loan. If you make timely repayments and handle your loan well, you will reduce your debt and increase your credit score.
On the flip side, the consequences of failing to meet your debt consolidation loan’s repayment terms are:
Higher expenses from interest
Negative impact on your credit score
Potentially more chaos in your personal finances
Factor #4. They’re Short-Term Solutions
Consolidating debt isn’t a be-all end-all solution.
Relative to credit card debt, debt consolidation loans are long-term.
This is part of why they are a popular solution to credit card debt. They give you more time to pay off credit card debt, at a much lower rate (assuming you don’t have bad credit).
Debt consolidation loan terms generally range from 2 to 7 years.
Given this, debt consolidation loans are a better solution to shorter-term, more expensive debts like credit card debts. However, they aren’t normally good for capturing large debts like mortgages and large auto loan debts.
Read the whole article, and all 5 factors👇
Go Deeper
Find out more about your debt repayment options with more Wealthy Thinker articles:
Combining your debts can accelerate your repayment schedule.
“I Need More Info on Debt Consolidation.”
There’s a lot to consider! Knowing your current numbers will get you started. Then read this -
Holy crap, will that feel good when you do it.
“I’m Too Overwhelmed By All of My Debts.”
Understandable. Just start somewhere. Having a simple plan to get you going keeps things at your pace, while still moving the needle.
“I’m never going to Best Buy again…”
“What Other Debt Management Options Are There?”
You have multiple options, and we recommend combining methods, researching advice and talking to a financial advisor to figure out what’s best for your situation.
Money Mindset Message
You don’t have to wear a bra on head or wait for lightning to strike to pay down your debt. But if it works for you, let everyone else know. (Weird Science, 1985)
Did you know?
oh what might have been, Krusty
On this day in 1971, the Harlem Globetrotters… Lost? That can’t be right… Playing against the New Jersey Reds, they lost track of the game and ended up losing 100-99. The crowd “Looked at us like we killed Santa Claus.” - Louis Klotz
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*overdraft fees source: https://finhealthnetwork.org/research/overdraft-nsf-fees-bigger-burden-than-previously-estimated/