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Gambling debt can become a serious crisis in your life. As with any debts you incur, a personal loan can be used for repayment. However, gambling debt presents special challenges that must be understood and faced, or else a personal loan could potentially make your financial problems worse, not better.Here’s what you need to know about using personal loans to get out of gambling debt, including how people get into gambling debt, why it’s a medical disorder, and how to effectively get out of gambling debt.
What Is Gambling Debt?
Gambling debt refers to money owed due to gambling activities, whether to casinos, bookmakers, or personal lenders. This debt arises when an individual wagers more money than they can afford to lose, often leading to borrowing to continue gambling or cover losses. These debts can result in significant financial and personal challenges, including strained relationships, legal troubles, and mental health issues. While gambling itself may not be illegal in many regions, unpaid gambling debts can lead to legal action, especially if owed to licensed operators or formal lending institutions. Addressing gambling debt often requires financial counseling, budgeting, and, in severe cases, seeking help for gambling addiction to break the cycle.
How Do People Get Into Gambling Debt?
Falling into debt while gambling is all too easy. “The House always wins” is a well-known saying, but gamblers nonetheless fall victim to the hope that they will buck the odds against them and win big.A gambling problem can crater your finances, and paying off gambling debt is hard. Cash and credit cards are often used to pay for bets, as well as cash advances from credit cards. If the losses are steep, people pull back on paying for their credit cards, car loans, student loans, and even mortgages to divert that money to their bets. This way, the debt spreads like a disease through all the financial accounts.The average debt generated by a man addicted to gambling is between $55,000 and $90,000, according to debt.org. Women gamblers average $15,000 of debt.Gamblers Anonymous says on its website, “Most of us have been unwilling to admit we were real problem gamblers. No one likes to think they are different from their fellows. Therefore, it is not surprising that our gambling careers have been characterized by countless vain attempts to prove we could gamble like other people.”
When Does Gambling Become a Medical Disorder?
Gambling disorder affects about 1% of Americans who can’t stop, despite the consequences, says Yale Medicine.Incurring debt is one of the signs that this has become a disorder, which is defined as “a condition in which gambling becomes an addiction and interferes with a person's daily life,” according to Yale Medicine.“An afflicted gambler may deplete savings, borrow money, or liquidate retirement accounts to finance their gambling, damage personal relationships (especially with a spouse and family), and have troubles at work,” says Yale.There are three forms of intervention used to treat a gambling disorder:
Psychotherapy
Psychotherapy, particularly cognitive-behavioral therapy (CBT), is commonly used to treat gambling disorders. CBT helps individuals identify and challenge irrational beliefs about gambling, such as the illusion of control or chasing losses, and replaces them with healthier thought patterns. Therapy also focuses on developing coping mechanisms to manage triggers, stress, and emotions that contribute to gambling behaviors.
Medication
The FDA hasn’t approved any drugs specifically to treat a gambling disorder. However, naltrexone and nalmefene, which may reduce cravings for alcohol or opioids, have been found in randomized clinical trials to be superior to a placebo in the treatment of gambling disorders. Antidepressants and antianxiety meds have proved helpful in some cases as well.
Group support
Some people find help with such groups as Gamblers Anonymous, a 12-step program dedicated to abstinence. Participants meet and share experiences, supporting one another in their efforts to stop gambling.
Options for Getting Out of Gambling Debt
In order to get out of gambling debt, the priority is first getting the gambling under strict control. Whether that means ceasing it altogether is a matter of debate. Some experts feel that someone who succumbs to an urge to gamble when the person knows it will cause problems with their finances, their job, or their relationships should not gamble at all.To try to pay down gambling debt while still gambling heavily is not going to be easy — and it’s unlikely to prove effective.Recommended: Strategies and Resources for Getting Out of Debt
Gambling Debt Forgiveness
Gambling debt is no different than other types of debt when it comes to financial responsibility. Even if your gambling problem is caused by a disorder, you won’t be able to get the debt excused on those grounds. It definitely doesn't qualify for government forgiveness programs, as do federal student loans. As for gambling debt relief offered by those who hold your debts, when a lender forgives some or all of the debt you still owe, there are usually strings attached. You’ll need to negotiate carefully and read all the fine print. In some cases, having your debt forgiven or discharged means you’ll still be required to report your unpaid debt to the IRS as ordinary income.
Gambling Debt Relief: Paying It Off
First, add up all of your gambling debts. Write down exactly how much you owe to each gambling provider, whether there are any repayment timelines attached to each amount, and how they interact with and affect your other debts.Next, negotiate a payment plan. You can go to your creditors and ask them to help you come up with a plan. You might be able to better manage your monthly cash flow with such a payment plan.
Consolidate Your Debt
A first step toward managing your financial problems is sometimes debt consolidation. You roll multiple debts into one loan with one fixed monthly payment. The goal is a lower interest rate, but you likely have to have decent credit to obtain one. The loan amount, interest rate, and length all revolve around your loan type and financial health. Depending on your credit score, debt-to-income ratio, and loan amount, you might end up paying a higher interest rate than you would on the original debt.
Personal Loans
Again, you will need good to excellent credit to obtain a favorable interest rate for a personal loan. These loans can be helpful to pay off credit card debt carrying high interest if you can get a loan with a rate that is lower. As for getting a personal loan large enough to cover a collection of debts (such as those occurring through gambling), you’ll need a solid credit score to obtain that.A downside to this approach is that if you fall behind in your monthly payments on the personal loan — perhaps because you haven’t conquered your gambling problem — then you will get hit by late fees. If you are delayed by 60 days or more, your credit rating will sink. Some people try to refinance existing personal loans to obtain a lower interest rate or more favorable terms. A good to excellent credit rating is usually required.Recommended: Personal Loan Approval Odds: Understanding Your Chances
Use Your Home Equity
Many home equity loans have relatively low interest rates compared to unsecured forms of debt like credit cards. Taking out a home equity loan to pay off higher-interest debts can be an attractive option. However, it’s very important to address the causes of your high-interest debt — whether it’s gambling or other factors — so that you don’t get trapped in a home equity loan debt cycle.Recommended: Home Equity Loans vs Personal Loans: Which Is Right for You?
Bankruptcy
When people are completely unable to pay their debts, they sometimes turn to bankruptcy. Debtors file for bankruptcy through the federal court system, and in return, they receive aid in discharging their debts or making a plan to repay them. Individuals, couples, corporations, and small businesses are able to file for bankruptcy. Bankruptcy can have a big effect on a debtor's financial record, however, particularly their credit scores.
Debt Settlement
Debt settlement, which can be a source of gambling debt help, is done outside the supervision of the courts. You can try to settle your debts yourself, or you can pay a debt settlement company to do so for you. With debt settlement, you may be asked to suspend payments to your creditors, which can cause you to incur interest and penalties while hurting your credit score. And there’s never any guarantee that debt settlement negotiations will be successful. But if it succeeds, you can end up paying less than the total amount that you owe.Recommended: Types of Personal Loans: Pros & Cons of Each
The Takeaway
Gambling debt can be very difficult to manage because sometimes the compulsion is not under control even after the debts turn into a mountain. Finding a debt repayment solution when your credit rating is shattered by missed payments and the money is still flying out of your accounts is challenging indeed.The first step is to get your gambling under control. Then debts can be assessed and strategies employed to dig out from under the problem.A personal loan for debt consolidation is one path to take. You will need good credit before you are likely to be approved for a loan with an interest rate and terms that make sense. There are many different kinds of personal loans to explore.Compare top lenders for personal loans.
Frequently Asked Questions
What is gambling debt?
How do people get into gambling debt?
What happens if you can’t pay gambling debt?
Photo credit: iStock/mbbirdy
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About the Author
Nancy Bilyeau
Nancy Bilyeau writes about student loans, mortgages, car insurance, medical debt and many other finance topics for Lantern. A veteran of the magazine business, she has edited stories on personal finance for Good Housekeeping and DuJour magazines and has written articles for The Wall Street Journal, Readers' Digest, Parade, Town & Country and Lifetime/A&E, among others. She is a graduate of the University of Michigan.
