A personal debt consolidation loan can be a great option for debt relief if you have good credit and a stable budget. You get a personal loan in an amount equal to your total credit card debt. Then you use the funds from the loan to pay off your credit cards. That leaves only the low-interest loan to pay off. https://consolidationnow.com/debt-consolidation-programs/
Let’s say you owe $20,000 total and have a good 700 FICO score. You talk to a lender, and you can qualify for a loan at 7% APR. If the loan has a three-year term, you will pay off your debt in 36 months with monthly payments of around $618. With five years, you’d pay off your debt in 60 payments with payments as low as $397.
For this option to work, you need good credit to qualify for the lowest interest rate possible. Anything over 10% won’t provide the benefit you need. You also need a stable budget because otherwise, you will run up new credit card balances and end up with more debt instead of less.
Credit counseling and debt management plans
If you don’t have good credit or a stable budget, but you want to pay back everything you owe to avoid damaging your credit, then credit counseling is the way to go.
Nonprofit credit counseling services provide a debt relief program known as a debt management plan. It consolidates all your bills into one affordable monthly payment. Of course, you still owe your original creditors, but the credit counseling organization helps you set up a repayment plan that your creditors approve.
The credit counselors work with the creditors to reduce or eliminate interest and stop penalties from applying to your account. That makes it easier to pay off each balance. And since you’re working with the credit counseling service, creditors will agree even if you have bad credit or your accounts are behind.
If you have accounts that are behind, most creditors will agree to bring them current after three payments. That makes this the easiest way to get multiple past-due accounts current all at the same time.
The catch is that any card you include in the program will be frozen when you enroll and closed when it’s paid off. But even that can be a good thing if you need to break your credit dependence.
The final option for debt relief is to go through debt settlement. This is where you only pay back a percentage of what you owe. For example, if you owe $5,000 on an account, you offer $2,500. In exchange for that payment, the creditor or collector discharges the remaining balance.
Is debt relief a good choice?
Yes. Debt relief programs can be a great solution for getting out of debt when traditional monthly payments aren’t working. And there is a range of different relief programs that are ideal for people with other credit scores and budget limitations.
Who qualifies for a debt relief program?
Debt relief programs are relatively easy to qualify for, so most people qualify. For any debt relief program, you need to have at least some income to make monthly payments. The monthly payments are often lower than the total payments you are currently paying. However, you will at least need to pay something.