💸 manage debt

Susan Bischoff
Jun 20, 2025
What is Debt Consolidation?
Debt consolidation can simplify your bills into a single monthly payment and help you save on high interest rates. But is a debt consolidation loan or similar refinancing strategy is the best option?
If you’ve ever logged into your Fruition account, clicked your Folio and thought… “dang, when did all these credit card and loan accounts add up?!”, then you might have considered debt consolidation. Debt consolidation can simplify your bills into a single monthly payment and help you save on high interest rates. However, this does not mean that a debt consolidation loan or similar refinancing strategy is the best option for you. There are various factors to consider, and you should always do your research before making changes to your debt management strategy.
The art of herding financial cats into a single, money-saving corral
Debt consolidation is a form of refinancing that allows you to move or replace your debt with new terms and conditions. The most common option is a debt consolidation loan. A debt consolidation is taking out a loan that can be used to pay down existing debts. Ideally, this loan will have a much lower interest rate than your existing accounts.
Let's say you have multiple credit cards with a combined total balance of $26,000 at an average APR of 21.49%. In this scenario, you could take out a loan for the same amount (or more) at a lower interest rate, let’s say 10.99%. You would then use the loan proceeds to pay off your total combined credit card balances, leaving you with one single monthly payment. Consolidating your debt into one payment will simplify your personal finances and could save you thousands of dollars over the long term. As an added bonus, in some cases your single payment will be less than the combined smaller payments which will create some much-needed breathing room in your monthly budget while putting you on the fast track to financial freedom.

Is debt consolidation right for you?
While the scenario above may sound great, it does not mean that debt consolidation is the best option for everyone. Before considering a debt consolidation loan or any form of refinancing, you need to do a cost-benefit analysis. Run the numbers and see how much you could realistically save. If the benefits outweigh the costs (fees, interest payments, etc.), then debt consolidation will likely be a good option for you.
However, consolidating your debt is not a cure-all for financial stress. Many people struggle under the weight of debt because they lack financial discipline. It is possible that you will need to focus on changing your spending habits and behaviors before considering debt consolidation. If you continue to spend without a realistic budget, debt consolidation will not help you manage your debt. In fact, it’s easy to backslide into old habits, continue your spending spree, and end up with the same or bigger credit card balances than before. This is why behavioral changes are vital when it comes to debt management.
Debt snowball strategy
One thing to consider before attempting debt consolidation is the debt snowball strategy. With the debt snowball strategy, you line up all of your debts and build a debt paydown plan that prioritizes debts with the smallest balances first. This strategy works well when your debt interest rates across all of your debt don’t vary much or are all in a closer range. Understanding what you owe and adding extra to your minimum payment of your smallest balance debt means you’re eliminating debt quickly and reclaiming the money you would have put towards the small debt for larger debts.
Debt avalanche strategy
Another option to consider is the debt avalanche strategy. With the debt avalanche strategy, you prioritize extra payments towards your highest interest rate debt first. This strategy is helpful when you have debts with a range of interest rates. Adding extra payments and eliminating debt with higher interest rates saves you more money in interest repayments. It also helps you eliminate those lower interest rate debts quickly since you won’t be hit with high-interest debt fees.
With either the debt snowball or debt avalanche strategy, you continue the minimum payments on your other balances while you pay off the highest priority debt as quickly possible.
The right tools to achieve your plans
If you’re scratching your head wondering how to build a debt paydown plan or track your progress, we can help. With our Debt Paydown tool you can add one or as many debts as you want to manage into a custom debt paydown plan using either the snowball or avalanche strategy. You can revisit your plan anytime in your Fruition account or app. If you don’t know where to start you can book a 20 minute or 50 minute session with one of our financial mentors to talk through your goals and build a game plan together.
The Fruition Folio allows you to link all your financial accounts (including your debts), and game plan whether the debt snowball or debt avalanche strategy is best for you. You can also schedule 1:1 meetings with our mentors to talk through your goals and put a game plan together.
Is debt consolidation your best financial move?
Debt consolidation or refinancing makes sense if you are in a situation where your current interest rate or payment plan is onerous or burdensome. A debt consolidation loan can help you ease the burden of debt, with the potential to give you access to even more cash to improve your budget and finances.
Break-even point
The same is true of refinancing a mortgage or loan; just be sure to factor in the costs of refinancing and find the break-even point (the point when the savings overtake the initial costs). For example, let's say you have a $10,000 personal loan at a 12% APR and you plan to refinance the loan at 8%. However, the cost of refinancing is $300. If this change saves you about $30 per month in interest, it would take 10 months ($300 ÷ $30 = 10) to break even. Will you keep the loan long enough to make the refinancing worthwhile?
Interest rates for a personal loans range from 7% to as high as 35% depending on your credit score and other factors, like the financial institution offering the loan or the type of debt being refinanced. Make sure you shop around for rates to see which options make sense.
Your credit score
Consider how a debt consolidation loan or refinancing will affect your credit score. When you are using debt consolidation to pay off high-interest credit cards, it usually has a positive impact on your credit after six to 12 months. Why? You are transferring debt to a separate loan and lowering the amount of available credit you use. However, this assumes that you will not start building up new balances on your credit cards once you have paid them off. On the other hand, if you do not use all of the loan to pay down debts, you will be adding to your total debt, potentially overextending yourself. This could lead to missed payments, which will definitely hurt your credit score.
Student loans
If you are weighed down by student debt, you might have four or five federal student loans, which you could consolidate into one private loan. Sometimes the new interest rate will be better, but there might be a difference in the flexibility of repayment options, as a government-backed student loan comes with repayment safety nets, while a private loan do not.
No matter what you choose to do, it is best to be proactive. Look for the information ahead of time and evaluate your needs, behaviors, and potential benefits beforehand.
Don’t wait for credit card loan offers to arrive in the mail; they are often most beneficial to the lender — not you.
Do your research and figure out the best solution to meet your needs.
Pay down debt with Fruition
By implementing these techniques and working towards paying down your debt, you can take meaningful steps towards financial freedom and security. Remember, the journey to debt-free living starts with a single step.