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4 Signs Debt Consolidation Is Right for You

4 Signs Debt Consolidation Is Right for You

by

JG Wentworth

November 28, 2022

8 min

A notepad that says "debt consolidation" above several listed dollar amounts added together

If you’re in debt, you may be looking desperately for any way to get out of it before it gets out of hand. Cutting your spending, couponing, taking on a second job—these thrifty tactics could help you slowly pay off your debt. But if your account balances are high, these payoff strategies are hardly going to be enough to avoid the crushing weight of high interest rates.

Fortunately, you have options!

Here are four reasons getting a debt consolidation loan might be a good idea for you.

1. You have high-interest, high-balance debts

Have you been making payments on your debts just to watch your interest rates hike your balance back up again? It’s a familiar feeling to many, and it’s part of why lots of people see debt consolidation loans as an attractive alternative to other types of credit accounts.

Many people choose to explore debt consolidation loans because they’re often offered at a lower interest rate than they’re paying on their other credit accounts.

Of course, the interest rate for any loan you’re approved for will depend on your credit score. Online personal loan rates can range from around 5.99% to 35.99%, with lower rates typically offered to people with better credit.

If you’ve been making monthly payments on your debts to keep your credit score up, you’ve shown future lenders that you’re unlikely to let your accounts go delinquent—which means you might be able to secure a debt consolidation loan with relatively favorable terms.

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

2. You don’t want to declare bankruptcy*

In general, people who are best served by bankruptcy are people who absolutely cannot pay their debts off on their own. But bankruptcy is mostly considered a last resort for a few key reasons:

  • Bankruptcy stays on your credit report for seven to 10 years
  • Insurance companies sometimes charge more for people who have bankruptcies on their report
  • People who declare bankruptcy often struggle to get approved for loans afterwards
  • Bankruptcy filings are part of the public record
  • Most people who declare bankruptcy have to hire an attorney to help navigate the process
  • Loan co-signers may be required to pay off any debts discharged in bankruptcy for the individual declaring

On the other hand, some people choose bankruptcy over debt consolidation because they can’t get favorable rates for a loan and don’t want to take out another high-interest loan.

But if you can swing paying off your debts each month at a potentially lower interest rate, then you might decide that debt consolidation is a much better option for you than bankruptcy.

Related Article: Bankruptcy: A Complete Guide

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3. You’d rather make just one monthly payment on your debts

Budgeting can be complicated, especially when you’ve got multiple credit accounts with different monthly minimums to pay each month. But consolidation fixes that by collapsing all those card repayment lines in your budget spreadsheet into just one!

Reducing the number of payments you make keeps your finances simpler. With a debt consolidation loan, you’ll have fewer due dates to keep track of and fewer interest rate changes to worry about.

In fact, your monthly payment might even be reduced when you choose to consolidate your debts! Because consolidation loan payments are stretched over a repayment period, choosing a longer repayment period could mean you pay less each month.

4. You have a steady source of income to make a monthly payment

While one of the major benefits of a debt consolidation loan is that you only have to make one payment each month, typically at a fixed amount, many people may still struggle to make that payment. While the minimum monthly payments on credit cards can be spaced out over the course of your month—and therefore paid whenever you have the cash available—a debt consolidation loan requires you to make one payment every month to avoid going delinquent.

If your cashflow differs each month and you can’t guarantee that you’ll always have the funds available to make your consolidated loan payment before its due date, it may be better to consider other routes to get out of debt, such as a debt resolution program.**

However, if you can afford to make payments reliably each month, then debt consolidation is a great option for you.

How JG Wentworth can help

If the above points ring true for you, you might find that getting a debt consolidation loan is a good idea. So—where to start?

True to our mission of helping people get financially healthy, JG Wentworth can connect you with leading names in personal lending that can offer customers debt consolidation loans tailored to their needs. Our free, easy-to-use online tool allows you to review offers from top lenders in an instant to find a repayment plan that works best for your financial situation.***

Related Article: What’s the Difference Between Debt Consolidation and Debt Resolution?

The information on this blog is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that you consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.

Sources cited

  1. Millerbernd, A. (2022, August 29). Personal loan statistics. NerdWallet. Retrieved from https://www.nerdwallet.com/article/loans/personal-loans/personal-loan-statistics
  2. Discharge in bankruptcy – bankruptcy basics. United States Courts. (n.d.). Retrieved from https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/discharge-bankruptcy-bankruptcy-basics
  3. Weston, L. (2020, September 21). Fear of bankruptcy holds too many people back. AP NEWS. Retrieved from https://apnews.com/article/virus-outbreak-73d65e30c38fff47bc03da7c353e91ed

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*Please consult with a bankruptcy attorney for more information on bankruptcy.

**Debt resolution program JGW Debt Settlement, LLC d/b/a JG Wentworth (“J.G. Wentworth”). Debt resolution program results will vary by individual situation. As such, it may not be suitable for all persons. JG Wentworth does not offer debt relief services in all states and fees may vary from state to state. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of debt relief services can potentially have an adverse impact on your credit rating, may result in you being subject to collections, and may result in other adverse action by creditors or collection agencies. Read and understand the program contract prior to enrollment. JG Wentworth does not pay or assume any debts or provide legal, financial or tax advice or credit repair services. You should consult with independent professionals for such advice or services.

***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.