If drowning in debt and trying to meet minimum payments is part of your everyday life, it’s time to look at other ways to pay off credit card debt, student loan debt, or any other form of debt you’re struggling with.
Debt relief programs are designed to help. They’re no quick fix, though. It can take years to tackle high-interest loans.
Think of a debt relief program as a long-term financial plan that will clear your debt and help you prepare for the future.
What is debt relief?
Many Americans experience crippling credit card debt and struggle to make minimum payments. Debt relief programs are services that help you stay on top of your payments. They can be the best way to pay off unmanageable credit card debt.
Debt relief is a strategy or plan that helps you pay off debt and makes payments more manageable. The debt relief program you choose will likely depend on the amount or type of debt you’re carrying.
Credit counseling and debt settlement are two common debt relief programs. They each have pros and cons, with real risks and rewards, but they share the same goal of eliminating debt.
How does debt relief work?
All debt relief strategies share one thing in common. They aim to reduce your debt burden.
Credit counseling is typically offered by non-profit organizations, providing access to counselors who can negotiate a payment plan on your behalf, safeguarding against collections and late fees. They may negotiate a lower interest rate and even lower monthly payments, but they usually stop short of negotiating to reduce the amount you owe. As part of their service, they’ll often work through your finances and build a financial plan for you, including help with basic budget money management and credit building tools.
Debt settlement companies usually negotiate on your behalf to pay off your debts with a lump sum payment, sometimes for less than the full amount you owe. But they charge a fee and often advise you to stop making payments until they’ve negotiated an agreement, which can damage your credit score.
Some debt relief programs may blend and utilize different strategies to get the best result, while others focus on one method.
How does debt relief impact credit scores?
The good news, debt relief programs can help you pay off debt faster and at reduced rates. The bad news, in the short term, it may affect your credit score.
But there’s more good news! If you stick to your debt relief plan, your credit score will improve as you pay off debt. So the ding to your credit score should only be temporary, making these plans a viable way to pay off credit card debt.
If you’re considering filing for bankruptcy as an alternative, think twice. You’ll face even more complications for your credit score. Bankruptcy may lift you out of debt, but it also can affect your credit score for up to 10 years, depending on your type of debt.
Look for specialized programs
Debt relief comes in many forms and should be chosen according to your debt. For example, there are specialized options for tax debt relief and state-of-the-art apps that handle payments for you.
Fintech debt relief programs
If you’re interested in a modern-day debt relief option, look into technology-driven AI programs. Companies like Bright Money use debt-focused technology to help users get out of debt faster in a low-stress, low-risk approach.
With Bright’s MoneyScience™ system, they tackle debt in a cutting-edge fashion. Bright users can qualify for a low-interest balance transfer on the spot, then raise their credit score, build their savings, and even plan for the future.
IRS tax debt relief
Tax debt relief is a lifeboat many Americans need when slogging through their debt. Debt is already difficult enough to pay, but having tax debt, aka back taxes, hanging over your head can feel dark, gloomy, and even oppressive.
Tax debt relief strategies seek to reduce the difficulty of paying back this debt and help users regain control over their finances.
The IRS wants people to pay what they owe, so they offer their own debt relief programs. With an IRS payment plan, the goal is to help you quickly pay off your tax debt.
Who should use a debt relief program?
While debt relief programs aren’t a cure-all and are not suitable for everyone, many people may benefit from this strategy.
Here are a few indicators a debt relief program is right for you:
- You have or are considering filing for bankruptcy.
- You’ve tried DIY debt relief, making plans and payments on your own, but you’ve made no progress.
- It’s a challenge for you to make minimum monthly payments.
- You are behind on loan payments, credit card debt, or other debt payments.
There is one scenario where financial experts do not recommend starting a debt relief program –if you are still adding to your debts. A better place to start would be to find help with spending, budgeting, and other personal finance goals. Some debt counselors offer assistance with this too.
Is a debt relief program the best way to pay off credit card debt?
If you’re struggling with high monthly payments, a debt relief program may work for you. Many people find that a debt relief program helps them pay off debt fast and saves them money. They can be the best way to pay off credit card debt.
Debt relief recap
Debt relief is available in many forms, from negotiated payment plans and credit counseling to fintech solutions and IRS programs. Choose the program that’s right for your debt.
Debt programs require serious commitment and can impact your credit score. If you’re unsure how to achieve the best financial results for your situation, reach out to an experienced financial advisor.