does debt consolidation work

Does Debt Consolidation Work? (Not Really)

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Have you ever made more than the minimum payment to your credit card, then received your statement the next month only to see that you didn’t even make a dent? It’s sooo frustrating, right?

I used to get so mad at the credit card companies for charging all that interest. I’d grumble to myself about how it would help so much if I just didn’t have to pay that crazy 18% interest rate.

So one day I decided to do something about it.

Unfortunately, I didn’t try the thing that would actually work.

No, I decided that the answer was in having fewer payments and a lower interest rate. Because that was my problem, right? (It didn’t even occur to me that my actions might have something to do with the debt I was in.)


I looked into Debt CON-solidation.

If you’re not familiar with it, debt consolidation involves taking out a loan that’s then used to “pay off” the multiple smaller loans that you have. There’s a reason “pay off” is in quotes like that here.

For one thing, some companies actually allow you to put the money you get from consolidating loans straight into your bank account. So…there’s a chance that the money might not even get used for its intended purpose. Instead you just owe more.

Even when the money IS used to pay off the smaller debts as intended, you still owe the money. Instead, you just owe it to someone else in the form of a new loan. In other words, all you’ve done is rearranged your debt. If you do happen to get a lower interest rate, chances are you’ll discover that it makes little to no difference in terms of your progress in getting out of debt. (You can see exactly what impact interest rates will have in your situation using this debt app.)



But here’s one of the worst parts: Chances are you won’t follow up with your newly “paid off” lenders and close the accounts.


does debt consolidation work


It’s Normal to Think “Closing a Credit Card is Bad!”

People are afraid to do it — even though it makes sooo much sense for them financially. Maybe you’re worried about your credit score, or about what might happen in an emergency. What if you need money? So you leave the accounts open, and before you know it you’re even deeper in debt.

I’m speaking from experience here.


Worst of all, you don’t change your habits.

That’s right, another huge downside is that while you haven’t actually made a dent in your debt by consolidating, you feel like you did. Feeling good about staying in debt isn’t a plus!

It’s bad, because getting out of debt requires both emotional and behavioral changes. If you feel good about your actions (taking out that debt consolidation loan), you have no reason to make the real changes that are needed to truly pay off your debt for good. Things like building an emergency fund and living on a budget so you can do the things that matter to you in life.

Instead, you stay stuck in the cycle of debt and stress.


If you’re ready to change your habits and REALLY pay off debt, take the first step here (for free):


Let’s Talk about Credit Scores for a Sec

I don’t know about you, but I’d rather have a lower credit score than owe thousands and thousands of dollars. I don’t even know what my score is at this very moment, but I CAN tell you that credit scores are made up of so many more things than just the number of open accounts you have. Stuff like your on-time payment history, for one. Chances are, the actions you take when paying off debt will INCREASE your score. (Ours definitely went up while we were paying stuff off.)

You know what I’ve needed my credit score for since paying off all our debt? Nothing.

I have money instead.

Chris Peach Rant

Chris Peach Head Shot 2When I was broke, stupid, and didn’t have a clue about managing money, my credit score was 730. I prided myself on that FICO score and in my mind it was a symbol of being financially successful.

Then we paid off $52k in 7 months and stopped borrowing money. We stopped using credit cards, stopped leasing cars, and saved up cash. Today we are debt free, have invested well, and have saved a ton of cash. The last time I checked my credit score, it was 692. Credit scores aren’t a symbol of having wealth. Money is.




Why Would a Company Lend you Money Like That?

Simple: they want to make money.

You’ve proven that you’re a steady borrower who’s likely to view debt as a solution and pay a ton of interest. (I kicked myself when I realized that.)

When you take out a debt consolidation loan, you get to pay that lender interest on the whole bundle of money rather than paying all those other people high interest rates. So they make the money instead. Plus, there can be additional fees too (think origination fees or even balance transfer fees) to help them make even more money right up front.

More fees = still more ways for them to make money off you.

It’s not really about helping you, although it’s typically phrased that way when you read the ads. The companies talk about things like eliminating “the stress” of multiple monthly payments, getting an interest rate “that may be lower”, and how it might mean “significant savings” for you.


But do you now what ACTUALLY does all that?

The thing that reduces stress, saves you money, and helps get you on the road to making your goals and dreams a reality?

Paying off your debt for REAL.


The thing that reduces stress, saves you money, and helps get you on the road to making your goals and dreams a reality?Click To Tweet


You can’t borrow your way out of debt, but you CAN make the kinds of changes that will turn your financial life from filled with stress to filled with ease.

My husband and I paid off over $147,000 in debt (including our house!), and let me tell you we did NOT do it by borrowing more money.

Nope, we did it the old-fashioned way, starting with the very most important thing: we stopped borrowing.

If we wanted something, we saved up for it and got it. If we had an emergency, we found a way to solve it that didn’t involve debt. We got raises, hustled on the side, built an emergency fund, and generally got our finances in order.


“I only spend money I already have” became our mantra. It all starts with that.


When you commit to only spending money you already have, you can do it. (And yeah, you will be tested.)

A funny thing happens once you commit: you start to make real progress. You stick with it through the setbacks and keep your eyes on the prize, building confidence in yourself and your ability to handle money along the way.

Until one day, you’re debt free!


-Jackie Beck

Jackie and her husband are living proof that it’s worth every step of the journey out of debt. The debt free life is awesome, and she wants to see you there! Be sure to check out more of what she has to say at



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As always, I first want to thank you for reading this blog because this means you are reaching for awesome with your money! I will keep putting content out there for anyone to gobble up and implement right away, however if you could help me out by sharing this post on your favorite social media platforms, it would mean the world to me! Just click on any of the social share buttons at the top or bottom of this post and you’ll be giving me a virtual fist bump, high-five, and a pat on the back. Thank you again and again!

-Chris Peach


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2 replies
  1. Millennial Moola
    Millennial Moola says:

    I’m a big fan of closing accounts, even if it leads to lower credit scores. The simplicity gained from having fewer cards saves way more money than you make from a slightly higher credit score.


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