Should I Consolidate My Debt?

If your debt is growing and your interest costs are on the rise, debt consolidation might be right for you.* Find a loan that works for you with our easy-to-use service! In just seconds, we'll match you with offers from top providers, tailored to meet your needs.

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Debt consolidation illustration

What is debt consolidation?


Consolidating your debts means merging multiple high-interest debts into one single loan, ideally with a lower interest rate. This might include credit card debt, personal loans, payday loans, or medical bills.


By combining multiple debts into one account, you only need to make one payment on those debts each month. This can be helpful if you’re struggling to balance budgeting both for your debt repayment and your regular expenses. A more predictable payment schedule may allow you to pay off your debts faster, especially if your consolidation account carries a lower interest rate.

Types of debt consolidation


There are several ways to consolidate your debts. Debt consolidation loans and balance transfer credit cards are easy to apply for and very popular, especially for those who want to consolidate unsecured debts that don’t have prepayment penalties tied to them. Consolidation loans are great if you’d like the stability of budgeting to pay off your debts in equal installments over a set repayment period, whereas balance transfers are ideal for people who want the flexibility of making payments of varying amounts for an indefinite amount of time while interest grows.


It’s also possible to consolidate secured debts—like refinancing your home, for example—but this process is not always as straightforward as simply applying for new credit. Often, this type of consolidation requires consultation with an appraiser before a new loan can be negotiated.

Key terms to know:


  • Unsecured debt:  Money lent in good faith based on a borrower’s credit history, such as with a credit card.
  • Secured debt:  Money lent that is backed by collateral, such as a mortgage.
  • Collateral:  An asset lenders use to secure a loan that can be seized if the loan is not repaid according to the terms of the lending agreement. Can be physical assets, like a house or car, or a deposit, as in with secured credit cards.
  • Prepayment penalty:  A fee collected by a lender when the borrower pays off part or all of their loan early. 


Related Article: A Guide to Everything You Want to Know About Credit

Is debt consolidation right for me?

Consolidation can be an excellent option for people who have high-balance, high-interest credit accounts and are prepared to commit to breaking the borrowing habits that led them deep into debt. 

For those who qualify, consolidation options may come with a lower APR than other types of credit accounts—or even special introductory APR offers. This can make a huge difference if high interest rates are affecting your ability to pay down your balances. People who consolidate their debts are most successful when they have the cashflow to make regular payments.

Man looking at debt consolidation options illustration
Illustration of a man being solicited by debt consolidation companies

What’s the best way to consolidate my debt?


The best way to consolidate your debt depends on your individual circumstances:   your credit score, the amount you want to pay each month, the total debt you’re consolidating, and so on.


JG Wentworth offers access to personal loan providers that can offer you a loan used to consolidate your debt. If you have something particular in mind—low APR, flexible repayment terms, special introductory rates, and so on—we might be able to help you find what you’re looking for!


Use our tool to explore consolidation loan options tailored to fit your needs.


    As with any loan you might take out, there’s no simple “yes” or “no” answer as to whether debt consolidation could affect your credit score.


    If you make regular, on-time payments, for instance, consolidation could help you build your credit score, because your payment history makes up about 35% of your score. It could also lower your credit utilization and diversify the types of credit you have—two factors that are considered positives on your credit report.


    Applying to consolidate your credit accounts could also lead to a hard credit pull, which, while standard, could impact your score for a short time. Opening a new account can also decrease the average age of your credit, which could negatively impact your score as well.


    Basically, depending on your unique credit history, debt consolidation likely won’t affect your credit score any more or less than another type of loan would. Only you know what borrowing risks you’re willing to take and whether the pros outweigh the cons for how your credit score may be affected.

    Bankruptcy is an alternative you might consider if you can’t get approved to—or don’t want to—borrow money to repay your high-interest debts, and you can't repay them on your own.


    However, while pursuing bankruptcy can wipe out some or all of your debt, it comes with a major con:  it will stay on your credit report for seven to 10 years, meaning you’ll face a larger barrier to borrowing in the future, with less favorable terms. That’s why bankruptcy is often considered a last resort for people struggling with debt.**

    It depends on the creditor’s assessment of the risk of lending to you.

    Some lenders may not see a less-than-perfect credit score as a barrier to entry for borrowing—but a low score would most likely lead to less favorable loan terms, like higher interest rates.

    Our tool can help you explore different loan offers and find one that works best for you, whatever your circumstances.***

    No. To give you an offer, your potential lenders only need to make a soft credit pull, so your credit score will not be affected if you’re just browsing options. 

    Sources cited


    1. Gerson, E. S. (2019, November 25). What is debt consolidation? Experian. Retrieved from
    2. Fernando, J. (2021, February 24). What does unsecured debt mean? Investopedia. Retrieved from
    3. Chen, J. (2021, June 30). Secured debt. Investopedia. Retrieved from
    4. Kagan, J. (2022, March 15). Collateral. Investopedia. Retrieved from
    5. What is a prepayment penalty? Consumer Financial Protection Bureau. (2020, September 9). Retrieved from
    6. Experian. (n.d.). Filing bankruptcy: Consequences, and alternatives. Experian. Retrieved from

    * JG Wentworth does not provide legal, financial or tax advice. You should consult with independent professionals for such advice.


    ** Please consult with a bankruptcy attorney for more information on bankruptcy and whether it is right for you.


    *** JGW Debt Settlement, LLC d/b/a JG Wentworth ("JG Wentworth") has partnered with Even Financial, Inc to provide this loan referral service. JG Wentworth is not a lender and cannot ultimately decide whether or not you are approved for a loan. JG Wentworth does not determine or influence the amount of money you may receive from using this referral services.