Debt Payoff Programs: Compare 3 Ways to Get Out of Debt
- Debt payoff programs help you manage unsecured debt, including credit card balances and medical bills, through debt consolidation loans, debt management plans or debt settlement.
- Debt consolidation loans simplify repayment by combining multiple debts into one monthly payment and may lower your interest costs if you qualify.
- Debt settlement may reduce the amount you owe, but it comes with significant risk to your credit.
- Debt management plans and debt consolidation loans are generally safer first options. Consider debt settlement only if you’re struggling to repay your debts and understand the potential impact on your credit.
3 types of debt relief programs
Debt relief programs generally fall into three categories: debt management plans, debt consolidation loans and debt settlement.
While some people use “debt relief program” as a catch-all term, these options work very differently and are for different financial situations. Here’s a quick overview of how the different options work and how they vary on cost and timing.
| Debt management plan | Debt consolidation loan | Debt settlement | |
|---|---|---|---|
| How it works | Make one monthly payment to a credit counseling agency, which pays your creditors and may negotiate lower interest rates. | Use one loan to pay off your current debts. If you qualify for a lower rate, you save money and can pay off debt faster. | You pay into a dedicated account instead of to your creditors. The company uses that money to negotiate your debts and may settle them for less than you owe. |
| Typical cost | Enrollment fee plus a monthly maintenance fee, often between $30 and $100 a month. | Origination fee that typically ranges from 1% to 10% of the loan amount, plus interest. | 15% to 25% of the enrolled debt. |
| Typical timeline | Three to five years | Two to seven years | Three to four years |
See LendingTree’s full guide on debt consolidation vs. debt settlement.
Check whether you may be a good candidate for debt consolidation
LendingTree’s debt consolidation calculator can help you figure out whether you could save money by consolidating. Below, plug in your existing credit card, personal loan and medical debts. And if you’re not sure of your credit score, check it for free with the LendingTree app.
How to choose a debt payoff program
The best debt relief option for you will depend on your financial situation, credit and goals. Here’s how to decide.
Choose a debt consolidation loan if…
- You have good to excellent credit.
- You qualify for a lower interest rate than you’re currently paying.
- You want one monthly payment without working through a third party.
- Your goal is to pay off your debt while minimizing the impact on your credit.
Choose a debt management plan if…
- You want help creating a budget and managing your payments.
- You’re struggling with high interest rates but can still repay what you owe.
- You want to avoid the credit damage that can come with debt settlement.
Consider debt settlement only if…
- You’re already behind on payments or facing serious financial hardship.
- You have limited ability to repay what you owe in full.
- You understand the risks, including credit damage, fees, wage garnishment and the possibility that creditors won’t settle.
Compare the tradeoffs
- Lowest risk: Debt management plans and debt consolidation loans
- Most guidance: Debt management plans
- Least impact on credit: Debt management plans and debt consolidation loans
- Most flexible repayment timeline: Debt consolidation loans
- Highest risk: Debt settlement
Which debt payoff option is right for you?
How to find a legitimate debt payoff company
After you’ve chosen a debt relief program, the next step is to find a reputable provider that matches the type of debt relief you choose.
If you choose a debt management plan
Work with a nonprofit credit counseling agency that offers debt management plans. Start by searching the database of approved credit counselors maintained by the U.S. Department of Justice. A reputable credit counselor can review your finances, help you create a budget and, in some cases, negotiate lower interest rates with your creditors.
If you choose a debt consolidation loan
Compare multiple lenders to find the lowest interest rate and fees you qualify for. Here are a few reputable debt consolidation lenders to help you get started.
| Lender | APR range | Loan amounts | |
|---|---|---|---|
 | 7.24% to 24.89% (with autopay) | $5,000 to $100,000 | |
 | 6.99% to 35.49%(with discounts) | $5,000 to $100,000 | |
 | 7.74% to 35.99% (with discounts) | $1,000 to $50,000 | |
 | 6.30% to 35.99% | $1,000 to $75,000 |
You can also read lender reviews from real LendingTree users before deciding which lender is right for you.
If you choose debt settlement
Choose a debt settlement company carefully. Look for companies accredited by the American Association for Debt Resolution (AADR) or the International Association of Professional Debt Arbitrators (IAPDA).
Before signing up, search the company’s name along with terms like “reviews” or “complaints” to see what other customers have experienced. You can also check the Consumer Financial Protection Bureau’s complaint database for complaints filed against the company.
Red flags for debt payoff scams
Legitimate debt relief companies operate transparently and never pressure you into signing up. Watch for these signs before you commit to a program or provider.
Pressure
Don’t work with any company that pressures you to pay an upfront fee or sign up for a program before they have thoroughly reviewed your finances and explained in detail how they can help you.
Too good to be true
If a debt relief program sounds too good to be true, it probably is. Watch out for unrealistic promises, along with buzzwords like “new government program” and “guarantee.”
Tax consequences
If a debt settlement company gets a creditor to forgive $600 or more of debt that you owe, that forgiven amount typically counts as taxable income to the IRS. Ask any debt settlement company upfront how it handles 1099-C forms so you’re not caught off guard at tax time.
❌Unclear fees or terms
Don’t sign anything without understanding how the program works and what it costs. Ask for the total fee amount in writing before you enroll, and walk away if a company won’t give you a straight answer.
See LendingTree’s full guide on personal loan scams.
Frequently asked questions
Debt relief programs can be a good idea if you can’t afford your monthly loan or credit card payments but don’t want to declare bankruptcy. If you’re already missing payments, a debt relief program is worth considering.
Debt consolidation can cause a small, temporary drop in your credit score, but it may improve your score over time.
If you consolidate your debt with a personal loan, the lender will typically perform a hard credit inquiry, and opening a new loan may temporarily lower your score. However, paying off high-interest credit card debt and making your loan payments on time can improve your credit over time.
To maximize the benefits, keep old credit card accounts open when possible and avoid building new balances after consolidating.
See LendingTree’s full guide on how debt consolidation affects your credit score.
Each type of debt consolidation program has different eligibility requirements, and these requirements can even vary by company. Here are some general guidelines:
- Debt consolidation loans typically require good credit to get a better APR than what you’re currently paying, but it’s possible to find a debt consolidation loan for bad credit.
- Debt management plans and debt settlement companies don’t usually have credit score requirements. Debt settlement programs specifically tend to require $7,500 to $10,000 in unsecured debt before they’ll enroll you.
If you can’t realistically repay your debts — even with a debt management plan, debt consolidation loan or debt settlement — bankruptcy may be worth discussing with a qualified attorney. Chapter 7 and Chapter 13 bankruptcy can eliminate or reorganize certain debts through the court system, though both have significant financial and credit consequences.
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