On this page
What's next
Earn a high-yield savings rate with JG Wentworth Debt Relief
High yield debt, often called “junk” debt in financial markets, is any form of lending that carries higher-than-normal interest rates due to increased risk. While this term originated in corporate finance, it’s a reality that affects millions of regular consumers in their daily lives. Let’s take a closer look at how this type of debt functions and could potentially impact your own financial life…
This information 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.
What makes debt “high yield”
High yield debt is characterized by:
- Interest rates significantly above prime lending rates.
- Designed for borrowers with higher risk profiles.
- Less favorable terms and conditions.
- Often more aggressive collection practices.
- Higher fees and penalties.
How high yield debt appears in consumer finance
1. Credit cards
Credit cards are one of the most common forms of high yield debt for consumers:
- Store credit cards often charge 25-30% APR.
- Credit cards for poor credit might charge up to 36% APR.
- Penalty rates can exceed 29.99% on regular cards.
- Cash advance rates are typically higher than purchase rates.
- Late payments can trigger rate increases.
2. Personal loans
These loans come in several varieties:
- Subprime personal loans (15-36% APR).
- Signature loans from finance companies.
- Online installment loans.
- Peer-to-peer lending for high-risk borrowers.
3. Auto loans
Vehicle financing can become high yield when:
- Borrower has poor credit (rates of 15-25%).
- “Buy Here Pay Here” dealerships are used.
- Vehicle is older or high mileage.
- Loan term is extended beyond normal terms.
4. Payday loans and quick cash
The highest yield category includes:
- Payday loans (annual rates can exceed 400%).
- Car title loans.
- Cash advance loans.
- Check cashing services.
5. Private student loans
While not always high yield, these can become so when:
- Borrower has no credit history.
- No cosigner is available.
- Variable rates adjust upward.
- School has high default rates.
Take your next step towards being debt-free
"*" indicates required fields
Why consumers end up with high yield debt
A few reasons why you might find yourself with this type of debt:- Credit history issues
- Low credit scores.
- Limited credit history.
- Recent bankruptcies or defaults.
- High credit utilization.
- Income and employment
- Irregular income.
- Recent job changes.
- Self-employment.
- Limited income documentation.
- Emergency situations
- Medical emergencies.
- Car repairs.
- Home repairs.
- Family emergencies.
- Limited financial knowledge
- Lack of understanding about alternatives.
- Pressure from aggressive marketing.
- Unfamiliarity with lending terms.
- Limited banking relationships.
The true cost of high yield debt
Financial impact
- Higher monthly payments.
- More total interest paid.
- Longer time to pay off debt.
- Reduced ability to save or invest.
- Potential impact on other financial goals.
Other Costs
- Stress and anxiety.
- Limited future borrowing options.
- Potential impact on employment.
- Reduced financial flexibility.
The bottom line
High yield debt is a significant challenge for many consumers, but understanding its nature, costs, and alternatives is the first step toward better financial choices. While sometimes unavoidable, there are usually better options available with some research and preparation. The key is to recognize high yield debt situations early, understand their true costs, and work actively to find better alternatives or exit strategies.There’s always JG Wentworth…
If you have $10,000 or more in unsecured debt there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include:- One monthly program payment
- We negotiate on your behalf
- Average debt resolution in as little as 48-60 months
- We only get paid when we settle your debt
About the author
Recommended reading for you
* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. 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 the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
This information 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.