Americans have a debt problem. Credit card debt is at an all-time high, with more than a third of U.S. households regularly carrying an average of $16,048 in revolving debt. Consumers who want to dig out of this debt hole are turning to personal debt consolidation. Is this wise?

Debt consolidation loans simplify your financial life by combining multiple debt payments into one. These loans typically have terms of three to five years, so you have an end date for your debt woes, and a consolidation loan can help your credit score by reducing your credit utilization rate—the percentage of available credit you use on your credit cards.

Here are four times when you should consider consolidating your debt.

You’ll pay less in interest

If a debt consolidation loan offers a lower interest rate than your other debts combined, then your loan interest payments will be less, plus you’ll have one monthly payment. In this case, you can pay down your debt faster than you would with multiple payments.

This is how that works: For instance, say you have three credit cards totaling $15,000 in debt. Each card carries a 20% interest rate compounded monthly. To eliminate your debts, you need to pay $500 each month for 42 months. In that time, you will pay $5,967 in interest.

But if you consolidate the $15,000 into one loan with a 12% rate, you will pay off the total in 36 months with the same $500 payment. You also save $3,044 in interest.

You have a good credit score

Your creditworthiness is a critical factor when applying for a loan. Without a strong credit score, you may not qualify for a loan that offers a low rate.

A good credit score could also mean the difference between a secured and unsecured loan. If you have bad credit, the lender may require that you get a secured loan. That means you must offer an asset as collateral—such as a house or car—before the lender will approve you for a loan. If you fail to repay the loan, the lender can seize your asset, a major risk for you.

You’re offered a loan with reasonable fees

Besides the interest rate, there is another number to consider: origination fees. An origination fee is the upfront cost to the borrower to get the loan, and it is nonrefundable. Generally, this fee is 5% of the total loan amount for a consolidation loan. An origination fee higher than that may outweigh the benefits of consolidation.

Origination fees also matter because they’re deducted from the loan. That means a $10,000 loan with a 5% origination fee will only net you $9,900. In some cases, the fee may be negotiable. However, a lender might raise your interest rate to accommodate lower origination fees.

Another fee to watch for is a prepayment penalty. The lender charges this fee if you pay off the loan early. This fee is a way for the lender to ensure it gets the full interest value of the loan. Prepayment penalties are increasingly rare, but it’s worth checking the fine print to be sure.

You want to change your financial life

Personal debt consolidation won’t do you much good if you continue to spend irresponsibly and rack up new credit card debt. Consolidating debt should not just be a temporary solution to a debt problem but also the start of a new direction for your financial life.

Debt is a cycle, and breaking that cycle takes work. In short: There is a psychology to spending, and borrowers must be certain they can adopt a new way of thinking about debt before seeking debt consolidation.

Word of caution

Some debt consolidation companies are unscrupulous and push unethical products that may require you to default on payments to enter the program. Others may encourage you to close credit card accounts, which can adversely affect your credit score.

Seek out well-known banks and credit unions that offer debt consolidation. Check the Better Business Bureau for complaints against unfamiliar lenders. And, always do the math to make sure the debt consolidation plan doesn’t require you to take any harmful measures.