What is debt relief?
Debt relief encompasses a range of personal finance strategies designed to help you reduce what you owe, lower your interest rates, or achieve both. It typically involves either reorganizing (or consolidating) your debt or negotiating a settlement, which is similar to debt forgiveness.
If you're struggling with more debt than you can realistically pay off within three to five years, debt relief may be worth exploring. However, even if you're able to manage your current payments, solutions like debt consolidation or balance transfers could still help you save on interest.
When approached wisely, debt relief can lead to financial freedom. However, proceed with caution— not all debt relief options are equally effective, and if an offer seems too good to be true, it likely is.
What types of debt qualify for debt relief?
If you’re seeking relief from a secured loan, such as a mortgage or auto loan, you may face limitations, as these loans typically don’t qualify for debt relief programs. Debt relief primarily targets unsecured debts, including credit cards, personal loans, personal lines of credit, and private student loans.
Debt Consolidation Loan
Quick look at a debt consolidation loan
Who it's for:
Borrowers with multiple credit cards who can manage their debt and have good credit.
How it works:
Combines your existing debt into one monthly payment, ideally with a lower interest rate.
Risks:
If you don't adjust your spending habits after consolidating, you could end up in more debt. Some lenders also charge origination fees as high as 12%, which is deducted from your loan before you receive the funds.
Debt consolidation doesn’t reduce the amount you owe, but it simplifies your payments. By taking out a debt consolidation loan, you can pay off your credit cards and replace multiple monthly payments with just one for the new loan.
Debt Settlement
Quick Look at debt settlement
Who it's for:
Borrowers with moderate to high debt who can't keep up with payments but want to avoid bankruptcy. It's best for those with low credit or borrowers that are highly utilized (near their credit limits).
How it works:
If your creditor agrees, you could reduce or eliminate part of your debt.
Risks:
Not all lenders are willing to negotiate. Even if they are, in some cases, debt settlement could cost more than you save, and it can hurt your credit score.
Debt settlement offers a way to reduce the amount you owe by negotiating with your creditors. Either you or a debt settlement company can work with them to lower your debt in exchange for a lump sum payment, helping you pay off your obligations faster and for less than the original amount.
Many debt settlement companies are ready to assist if you have at least $10,000 in debt, making this option accessible to those looking for significant financial relief.
Bankruptcy
Quick Look at bankruptcy
Who it's for:
Borrowers with debt they know they cannot repay.
How it works:
Wipes out some or all of your debt through legal proceedings.
Risks:
You may have to sell valuable assets or commit to a long-term repayment plan. Your credit will be severely impacted for an extended period. Additionally, it is easy for others to see if someone has filed for bankruptcy.
Consider bankruptcy only as a last resort. While it can offer a fresh start if you're overwhelmed by debt, the consequences are severe, so it's important to understand the full impact.
In Chapter 7 bankruptcy, you might have to sell some personal assets to help pay off your debt. With Chapter 13 bankruptcy, you won’t have to sell anything, but you’ll need to commit all your disposable income toward repaying your debt over a three- to five-year period.
TAKE A STEP IN THE RIGHT DIRECTION
Explore more
efficient ways to
Payoff Debt
Questions about the process? We're here to help you get started!
Disclaimers:
*Assumes all of your debts are eligible for enrollment, are enrolled in the program, and you successfully complete the program. The majority of clients who successfully complete the program resolve their enrolled debts in 24 - 48 months (average 35 months).
Not a broker or lender: the purpose of Finally Payoff Debt (“the website”) is to connect potential borrowers with lenders and financial service providers. Finally Payoff Debt (“the website” does not provide any offers of credit or solicitation to lend. The website and its operators only provide a service and are not agents, representatives, or brokers of any lender, do not make any credit decisions and do not charge potential borrowers for any loan or product. We are paid by Lenders, Lender Networks and other Advertisers: Finally Payoff Debt (“the website”) offers a free, for-profit, advertiser-supported loan connecting service to consumers. Lenders in our network and other third-party lender networks we use pay us if a lender offers you a loan after reviewing your information through our service. You never have to pay a fee to use our services to connect you to a loan offer. Always review all options available to you and never assume a loan offer you receive is the best loan offer available to you. See our Ad Disclosure for more information.
Personal information and credit implications: Finally Payoff Debt (“the website”) may collect personal information provided by you for the purpose of submitting it to our lending partners. The purpose of this will be to obtain consumer report information from your credit profile in order to do a credit check, to verify your information, review your creditworthiness, prequalify you, and/or determine if you qualify for certain credit terms. You are under no obligation to use this website to apply for credit or initiate contact with any lender. Late payments or nonpayment of loans may result in additional fees or collection activities, or both, as well as negative impacts to your credit score. Each lender has their own terms and conditions, please review their policies for further information.
Availability: Residents of some states in the U.S. may not qualify for a loan as a result of certain lender requirements. Finally Payoff Debt (“the website”) does not guarantee that submitting your information will result in you being offered a loan product by a lender, or you being offered a product with rates or terms as desired. Many factors about you and your loan request information will impact the terms of the loans that may be offered to you. Always review all options available to you and never assume a loan offer you receive is the best loan option available to you.