What is Debt Relief?

Don’t let debt overwhelm you

Living with debt can be very stressful, not only to you but also to your bank account. Luckily, you don’t have to suffer. There are services out there that can help you manage your debt. Once you know your credit score and have a comprehensive overview of your debt, you’re ready to start tackling goals. While becoming debt free is probably your main goal, it’s best to start smaller, based on your situation. That’s where the expertise of a debt relief expert comes in handy!

Who it’s meant for and what it does

Debt relief is a solution for individuals that want to manage multiple types of debt with a single monthly payment. A debt relief company will negotiate all your debts to help you get better monthly payments and interest rates. They may even be able to negotiate down some of your current debts. Then, you’ll pay your debt relief company one monthly payment to go toward all your debts. Debt relief providers will typically charge a fee for services, so be prepared to spend just a little of money for that expert advice and actionable steps to improve your situation!

Benefits of Debt Relief
  • A single monthly payment

  • Negotiate your existing debt

  • Potential reduction in interest rates

  • A unique program just for you

Benefits

If you have overwhelming debt that cannot be settled, bankruptcy is also an option. After taking the means test to determine if you should enroll for bankruptcy, it could allow you to just walk away from your debt and hit the reset button, but at a cost to your credit score.

That’s where debt settlement companies come in. The longer you go without making a payment, the more likely your creditor is willing to forgive. So if you don’t see bankruptcy as an option, but you want to settle some of your debts, hiring a debt relief company can make sense.

Drawbacks

Debt relief companies will manage your relationship with your creditors in order to negotiate your debt and reduce the amount of money you owe. Essentially, you agree to stop paying your creditors and instead, deposit money into an escrow account each month managed by the debt relief company. As you continue to miss payments, your creditors will continue to lose money, to a point where they may be willing to settle for less than what you owe. But not all creditors will work with debt settlement companies, the FTC and the CFPB warn. This will also have a negative impact on your credit score in the short run.

Debt relief companies cannot help with debts that are secured with collateral, such as an auto loan or home mortgage. They also cannot help with federal student loans or state and federal taxes.