Why debt consolidation deserves a second look
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When my daughters started receiving credit card offers before they’d had their first paychecks, I knew it was time for a conversation. As a dad and as a lender, I’ve seen too many young adults and their parents end up overwhelmed by debt. What starts as one credit card becomes several, until debt and stress take over.
We are seeing this problem worsen in today’s economy, as the cost of living is becoming increasingly expensive. Credit card usage is at its highest, and credit card delinquency is on the rise, causing families to pay more in late fees and finance charges. Payday lenders, charging extremely high interest rates, are as busy as ever, and finance companies are charging high-rate, high-payment personal loans. Hoosiers are struggling to make ends meet and taking on debt to stay afloat.
That’s when they walk through our door, and one of the first solutions we explore is debt consolidation.
Whether it’s an individual balancing multiple credit cards or a business managing several loans, debt consolidation can immediately provide financial relief by simplifying and reducing monthly expenses. Long term, this strategy saves money on finance charges, all while improving credit score and ultimately, restoring peace of mind.
Here’s a typical example: $25,000 in credit card debt with a 28% interest rate means a minimum payment around $750 a month. That barely touches the balance.
A $25,000 personal loan at 9.9% for 60 months would lower that payment to $530. That’s $220 in monthly savings and more than $17,000 saved in finance charges across the life of the loan.
For larger balances of $25,000 or more, home equity loans work similarly. By using a home’s equity to secure a lower rate, members reduce stress, cut expenses and gain control again.
One member I’ll never forget was a widow in her sixties. After her husband of 40 years passed away, she coped by traveling and visiting family, putting it all on credit cards. In two years, she had 14 open cards totaling $60,000. Her credit score dropped from the mid-700s to 625, with a monthly minimum payment of nearly $2,000.
She thought she’d have to take a full-time job just to stay afloat and was worried she’d lose her home. Instead, we worked with her on a $75,000 home equity loan. Her new payment was $600, her stress level dropped, and she didn’t have to leave her home. Every year, she returned for a financial review, proud of her credit, and she always brought homemade cookies as a thank you.
Stories like hers are why I love what I do and why I always tell people: debt doesn’t have to be forever. While many people are overwhelmed by budgeting strategies, they often just never learned what to do differently. Financial confidence starts with education, and the best case is when it starts early.
I’ve coached my daughters through budgeting for their first cars, avoiding credit card traps and building healthy financial habits, but I know not every family has those conversations. Most people aren’t taught money management at school or in the home. Instead, they learn about money the hard way and sometimes only after it snowballs.
Having a trusted person to talk to, whether it’s a parent, a mentor or a lender, is as much a game-changer for kids as for adults. Many financial institutions offer product solutions to provide hands-on education. At Everwise, we offer youth debit card options and many free online financial education modules for families to complete together that make learning about money and financial responsibility fun.
Debt consolidation isn’t a magic fix, but it’s an effective tool that can help families and businesses breathe easier. It’s about building long-term financial confidence, knowing where you stand and having a plan to move forward.
The information provided is for educational purposes only. The views and opinions expressed are solely those of the author. This information should not be considered to constitute financial, tax, legal, or accounting advice or recommendations. Please consult with an attorney, financial or tax professional for guidance.