The Debt Strategy That Can Lower Interest Rates (And Increase Your Net Worth)

Have credit card, student loan, or household debt you're still working to pay off? You're far from alone. Experian data found that the average consumer owes a whopping $104,755 in debt, as of June 2025, with Gen X and Millennials owing the most. Credit card debt is the most common type of debt by a landslide, with over 78% for people across all generations carrying a balance on their cards. Just over 60% of the population owes auto debt, while mortgages, personal loans, HELOC, and student loans round out the other most common debt types. There are plenty of other alarming stats about American consumer debt that should concern you, but the good news is that there are things you can do to get a better grip on your own accounts.

Unless you win the lottery or suddenly get a massive raise, there's no magic bullet to paying off everything you owe right away. However, if you have multiple debt accounts, there is one strategy you can utilize to help set a clearer path to paying your balance off, while also helping you grow your net worth at the same time: debt consolidation. This strategy rolls multiple debt accounts into one, which allows you to make just one monthly payment, instead of multiple, and often for a lower interest rate. This can help you free up more cash which you can then use to help build or grow your assets — thereby increasing your overall net worth. With that said, there are quite a few banks and companies that offer debt consolidation so it's important to ensure you're doing what's best for your financial future by fully understanding your options.

There are two primary ways to consolidate debt, both of which can charge fees and vary depending on your financial history. The first way is through taking out a debt consolidation loan. This loan will pay off the remaining balances on your selected accounts and close them permanently. You'll then start making just one monthly payment to your new lender instead — over a set term with a fixed interest rate. However, it's worth remembering that the annual percentage rate (APR) you can hope to get on this kind of loan will largely depend on how high your credit score is. Also, depending on how low you want your monthly payments to be, you can decide to set a shorter or longer repayment period. This method works for many different kinds of debt, but it can be highly effective for large balances like student loan debt.

The second method is to sign up for a balance transfer card, which could be a good option if your main source of stress is credit card debt specifically. While signing up for a new card while you're already in debt may feel counterintuitive, this type of card allows you to move your existing balances onto one account with one monthly payment — usually with a promotional APR of 0% for an initial fixed term. However, there are some catches. Your credit score needs to be good (usually at least 670, according to Experian) in order to qualify, which could be challenging if you've struggled with debt for some time. Likewise, if you don't pay off your debt before the 0% introductory APR offer ends, the card's interest rate will kick in.

If you're among the many Americans who owe debt on multiple accounts, it can naturally feel as though it's tough to get ahead, especially in terms of growing you net worth. While debt consolidation isn't going to change the fact that you owe money, it can nevertheless help you grow your net worth faster by reducing the amount you're paying off each month. Plus, by combining multiple balances into a single loan with one set APR (or, in the case of a 0% balance transfer card, no APR amount to start), more of your monthly payment can actually go toward reducing the principal instead of just covering interest. This can help you pay off your debt faster, thereby lowering your total repayment cost.

It's also worth noting that debt consolidation can help reduce your risk of missed or late payments, which will in turn help to improve your credit score. Even though you will still be paying off your debt monthly, building up a stronger credit profile can help lead to better borrowing terms in the future, freeing up more of your income to save, invest, and steadily grow your net worth. At the very least, consolidating your debt will help you set a clear financial strategy in writing, which is one secret to protecting and growing your fortune over time.