Certified Financial Planner (CFP) Exam 2026 – 400 Free Practice Questions to Pass the Exam

Consolidating loans is often the most effective recommendation for a client seeking to reduce debt because it simplifies repayment and can potentially lower interest rates. When a client consolidates, they combine multiple debts into a single loan, which typically results in a lower overall monthly payment and a single due date. This can not only ease the burden of managing multiple payments but can also help the client save money on interest.

Additionally, consolidating loans can improve cash flow, allowing the client to allocate more resources toward paying off their debt more rapidly or to save for future needs. It also helps in potentially improving the client’s credit score over time, as it can result in lower credit utilization and easier management of one account compared to juggling multiple debts.

In contrast, options like investing in a high-risk portfolio might expose the client to more financial risk and does not address the immediate concern of debt reduction. Increasing credit card limits could encourage further spending rather than focusing on paying off existing debts, and lowering savings rates can jeopardize financial security by reducing liquidity for emergencies or future opportunities. Therefore, loan consolidation stands out as the most prudent and effective strategy in this situation.