Debt Relief: Advantages and Disadvantages of Debt Relief Options
Always free and will not impact your credit score.
If your debt has become overwhelming, you might turn to one of the many debt relief options available. The different forms of debt relief, including debt consolidation, debt settlement, debt management plans, and more, can help you get out from under the burden of debt and start making more progress on your finances.
Each of the different options available has some advantages and disadvantages, and no solution is right for everyone. Ultimately, it’s important to find the debt relief option that’s best for you, both in the short and the long term.
Debt Solutions for All Situations
Debt Consolidation Loans
A debt consolidation loan can help you lower your interest rate and reduce the number of monthly payments you make, all while allowing you to make progress on paying off your debt.
Debt Management
If you want better loan terms or help paying off your debt but don’t qualify for a new loan, a debt management plan can help you get ahead.
Debt Relief
If your current debt amount has become unmanageable, debt settlement may be right for you. It can help you reduce your debt amount and get out of debt in a shorter amount of time.
When Should You Consider Debt Relief?
It might be time to consider debt relief when your financial situation has become unmanageable. Here are a few examples of when it might be necessary, or at least the best option.
You’ve Lost Your Job
If you’ve lost a job before, then you know just how big of an impact it can have on your finances. Even if you do have emergency savings built up, unemployment often results in someone getting behind on their bills, including their debt payments.
You Have Medical Debt
Medical debt, unlike some other types of debt, is often completely outside of our control. You can’t determine when you’ll get sick or sustain an injury, but you’re still on the hook for the payments.
You’re Behind on Monthly Payments
To find out if you qualify for the best loan offers, get prequalified. When it comes time to apply for your business loan, you’ll need to have proof of income, identification, and other documentation as requested.
You Can’t Afford Your Debt Payments
Most of the scenarios that would lead someone to use debt relief have one thing in common: you can’t afford your debt payments.
How Debt Relief Works
Debt relief is designed to help reduce the amount of debt you have or make your debt more manageable. Depending on the type of debt relief you choose it can help you lower your monthly payments, lower the interest rate on your debt, reduce the number of monthly payments you make, or lower your debt balance altogether.
Get Help or DIY
Debt relief can either be done on your own or with the help of a company. Certain types of debt relief work best with a bit of help, but some debt relief companies charge high fees and don’t necessarily help you get the results they promise.
Benefits and Drawbacks
It’s also important to understand the long-term impacts of debt relief. Every type of debt relief helps lighten the burden of your debt. But some options have other implications, such as harming your credit score or showing up on your credit report for many years.
Ultimately, there’s no type of debt relief that’s right for everyone. It’s important to understand how each one works, as well as its pros and cons, so you can choose the one that’s best for your situation.
What Kinds of Debt Relief Are There?
The debt relief that’s right for you will depend on the type of debt you have, how much debt you have, your current financial situation, and other factors.Learn about the most popular types of debt relief and when it might be right for you.
The debt relief that’s right for you will depend on the type of debt you have, how much debt you have, your current financial situation, and other factors.
Learn about the most popular types of debt relief and when it might be right for you.
Debt Consolidation
Debt consolidation is the process of taking out a new loan — usually a personal loan — and using it to pay off several existing debts. You’re able to combine multiple
Debt Management Plan
A debt management plan is a type of debt relief that helps you get on a more manageable payment plan. To create a debt management plan, you would typically work with a credit counseling agency
Debt Settlement
Debt settlement is a type of debt relief where you settle your debt for less than you owe. When you go through debt settlement, you’ll usually
DYI Debt Relief Plan
If you’d rather not hire a company or an attorney to manage your debt relief, you can do it yourself. If you’re up to date on your payments,
What to Expect on a Debt Relief Plan
There are several different types of debt relief, and each one looks a bit different. In many cases, you’ll hire someone to negotiate with your creditors on your behalf. If that’s the case, then it’s best to avoid contacting those creditors on your own. Allow the company or person you’ve paid to do their job.
During the process, the company you’ve hired will communicate with you about what’s expected of you. They’ll work with you to get an idea of what you can afford for monthly payments or a settlement amount. If you’ve hired a company to negotiate debt relief on your half, it’s important to ask them how — and how much — they get paid. In many cases, companies charge a percentage of the settled debt amount. Other companies might have a flat fee.
Dos and Don’ts
of Debt Relief
Debt relief can drastically improve your finances, but there are also some pitfalls to avoid.Below are some dos and don’ts to make your debt relief more successful and help you avoid making a bad situation worse.
