Debt Relief: Understand Your Options and Make a Plan
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Are you struggling with credit card debt, having trouble meeting your monthly payments, or trying to rebuild your credit? You aren’t alone. Americans altogether have a staggering 853 million dollars in total debt. Knowing what type of debt relief option is right for you can help you stop wasting time by finding a solution that matches your specific needs.
But where can you go for help?
With such a vast array of information online, it is easy to get overwhelmed. You can find yourself clicking on blogs, videos, and forums and still not getting any closer to finding the help you need.
This article will help you identify the best options for debt relief based on your personal and financial circumstances.
Related: Best Debt Relief Companies
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What is debt relief?
When debt gets beyond your control, debt relief providers can:
- Reduce payments, fees, and interest
- Consolidate outstanding debt
- Stop harassing emails, phone calls, and letters
- Refinance existing loans
- Provide a free credit review
- Find someone that will talk to creditors for you
- Provide budgeting help
- Have your debt completely forgiven
- Rebuild your credit rating in a positive direction
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
Top 5 debt relief options
1. Credit Counseling
Credit counseling includes discussions with trained and qualified budgeting and consumer finance professionals. When you speak with a credit counselor, they can serve as your advocates and provide you with unbiased guidance regarding your particular credit status. You can talk to credit counselors through in-person meetings, online, or over the phone.
A credit counselor will ask you questions and should get a comprehensive overview of your financial situation before offering any debt management solutions.
Many debt counseling agencies operate as non-profit organizations, meaning they do not directly benefit from your decision to sign up for debt management plans.
Credit counseling can help you:
- Review your budget or create a budget if you don’t have one
- Identify which bills are a priority
- Contact your creditors for you
- Establish a debt management plan
Working with a debt counselor will allow you to enroll in a debt management plan and make one monthly payment that is distributed to your creditors.
Debt management plans don’t require you to take out new loans or open new credit accounts for balance transfers.
A reputable credit counseling agency will disclose all pricing and fees upfront and in writing. They will negotiate with your creditors for you, so you don’t have to.
Plans like this seek to pay off all balances within three to five years.
Best for those who:
- Want free credit advice
- Need help creating a budget
- Want a debt management plan
- Don’t know where to start
2. Debt consolidation
Debt consolidation allows you to take out a personal loan to pay off various lines of credit and replace them with a single monthly payment. The goal of debt consolidation is to create a roadmap that eliminates all of your debt over a more extended period, such as three to five years.
Debt consolidation works by establishing a debt consolidation loan or balance transfer credit card. Many borrowers turn to debt consolidation when they have several lines of credit with higher interest rates. Consolidating these lines of credit into a single loan with a lower interest rate might make sense.
Debt consolidation can be a great choice if your credit score is still high enough to qualify for a lower interest rate than what you are currently paying. It can also help raise your current credit rating by affecting your credit utilization, which could be very high if you maintain large balances on multiple credit cards.
Debt consolidation is not a free service, and taking out a debt consolidation loan may have costs other than just interest. Set up fees, balance transfers, and annual fees may apply to your debt payments. Discuss all the fees a lender may charge beforehand to understand the total cost and decide if debt consolidation is the right solution for your credit problem.
Best for those who:
- Have multiple lines of credit
- Seek a long-term solution
- Have a large amount of total debt
- Qualify for a lower interest rate
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
3. Debt forgiveness
Debt forgiveness might sound like a great option for those that qualify. But, it is important to protect yourself when seeking information about debt forgiveness from aggressive marketing and scams.
Unfortunately, there are many fraudulent debt forgiveness offers on the internet, and it can be exhausting trying to separate these scammers from any legitimate assistance.
Debt forgiveness may be available to you through programs like the federal government's public service loan forgiveness program. However, you will want to contact them directly on their website, not through an online search.
Lenders may also forgive debt due to financial hardship or a life-changing event such as a serious illness or disability. You need to reach out to them directly to see if your lender can forgive some of your debt. Be honest about your circumstances and listen to what they have to say. Many reputable lenders will work with you to keep your account in good standing.
It is important to remember that when a debt is forgiven, it requires you to pay additional taxes at the end of the year. This is because the IRS will see any type of debt forgiveness as taxable income and will be reported as such by your lender.
Always contact your lender directly when discussing options for loan forgiveness. Third parties are often scammers and cannot negotiate on your behalf.
Best for those who:
- Qualify for federal loan forgiveness programs
- Experience financial hardship
- Experience a severe illness or injury
4. Debt settlement
Debt settlement involves negotiating with your creditors to reduce your total balance by offering to pay a portion of the balance in full. As an alternative to a single lump sum payment to settle debt, often, creditors will allow you to make monthly payments.
You can choose to negotiate a debt settlement on your own, or a creditor may even contact you with such an offer.
A debt settlement company can help you by contacting creditors, running your credit report, and prioritizing which debts you should tackle first through an appropriate repayment plan.
The biggest benefit of debt settlement is that some creditors are willing to accept as little as half of the initial total or less in exchange for clearing your unsecured debt and closing your account.
Debt settlement programs can be a great method to get away from credit card companies, but it's crucial to understand that even when an account is closed and an amount is paid, the debt can still show up on your credit report for seven years.
Like debt forgiveness, debt settlement may require you to pay additional taxes at the end of the year. Any amount forgiven through negotiation is considered taxable income by the IRS and will be reported by your creditors.
Best for those who:
- Have accounts in collections
- Have charged off accounts
- Have recent debts
- Can make regular payments
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
5. Bankruptcy
If you find yourself in a situation where your total debt has sky-rocketed, and you can’t see any way out through a payment plan, you may want to consider bankruptcy as a debt relief option.
Chapter 7 bankruptcy allows you to eliminate many outstanding debts. In addition, bankruptcy can protect you from losing assets like your savings and retirement if creditors threaten to take you to court.
Bankruptcy will severely damage your credit and remain in your credit history for seven to 10 years, so it is not something you will want to enter into lightly.
Bankruptcy is a legal process so you will need the assistance of a qualified bankruptcy attorney.
Filing for bankruptcy is always a last resort, but it may be the only option for some. You might also be interested in how bankruptcy compares to debt settlement, as they can both be valid options for debt relief.
If you have a large amount of debt, little or no means of repayment, or if your credit rating has already been significantly damaged, filing for bankruptcy may be your best option.
Best for those who:
- Are overwhelmed with debt
- Have no means of repayment
- Have severely damaged credit
Find a debt relief option that’s best for you
With 843 billion dollars in combined consumer debt, more Americans are turning to debt relief programs than ever before. But with all the misinformation and scams online, it can be hard to know where to seek help. Your best bet for learning more about reputable debt relief choices and how to avoid, spot, and report fraud and scams is the consumer financial protection bureau.
Debt relief comes in many forms and is not a one-size-fits-all solution. The debt relief option you choose will need to be customized to your unique situation.
Working with an experienced debt counselor could be valuable to someone who doesn’t know where to start or who might not have a clear picture of their financial situation. But that might be a waste of time for someone who has already done the research and needs someone who can actively fix their credit problem and achieve a specific goal.
Every debt problem can be different. That is why it is important to choose the right debt relief solution for you.
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