Virtuous Cycle of Debt Consolidation

This article explains what we call the Virtuous Cycle of Debt Consolidation. This is what happens while you are consolidating your debt and how the process reduces your debt faster, improves your credit rating, and helps you sleep better at night.We have admittedly talked a lot about debt consolidation, including:

As such, this article will not focus much on those aspects. Don’t worry though, as we will provide a number of helpful links at the end of this article should you be interested.

The Virtuous Cycle of Debt Consolidation

As we said earlier, this focuses on what happens after you have consolidated your debt. In broad strokes, you take your unsecured debts (in this example, the individual is sitting on $48,000 in debt across three different cards) and you roll them into a single debt consolidation loan. This is where the Virtuous Cycle of Debt Consolidation begins…

  • At first, you haven’t actually reduced your debt at all. Instead, you have simply transferred it to a lower interest rate loan. This takes your annual interest payments from almost $9,000 to less than $5,000 in the first year
  • These lower interest payments allow you to pay your debt down faster – in the first year alone you can make around $4,700 more in principal payments
  • The important thing here is that you pay down more of your debt without paying more per month. This allows you to improve your financial standing without adding any strain to your family.
  • As you pay down your debt faster and stop missing payments (if you had been), you raise your credit rating
  • As you raise your credit rating, you can qualify for an even better loan. The ultimate goal is to roll your debt into a refinanced mortgage, which offers the absolute lowest interest rate possible.

As you consolidate your debt, you improve your financial standing. As you improve your financial standing, you become a safer borrower from the bank’s perspective. The safer you appear, the better interest rate you can get. This process continues in steps until all of your debt is rolled into the lowest interest rate available.


This process of faster debt reduction ==> increased credit rating ==> better financing is what we refer to as the Virtuous Cycle of Debt Consolidation and can save you thousands of dollars in interest payments every year.

Additional Resources

If you are interested in debt consolidation and other related topics and would like to learn more, feel free to check out some of our other blog posts:

Interested in consolidating your debt? You can apply online. It’s quick, easy, and you are under no obligation!

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