Debt is a daunting challenge for most people, with the average debt of an American citizen estimated to be $90,460. For most Americans, debt is a way of life. While some debts are good, others can be devastating. For instance, if you take a loan to purchase a home or invest in your business or education, this can be considered as good debt.

On the contrary, we are witnessing an alarming trend because the younger generation isn’t utilizing their credit card responsibly. As a result, they get into an eternal cycle of debt. In the worst-case scenario, where one either loses their job or is faced with unforeseen circumstances, they may be unable to get relief from debt.

In this piece, we explore debt relief: What it is and when you should seek it.

What is Debt Relief?

Debt relief refers to a collection of strategies that make managing debt easier. For example, you can employ debt management, debt counseling consolidation, debt cancellation, and debt settlement to slow down or stop debt in your life. All types of debt relief options have the same goal—to help you find a workable route to eliminate your debt.

How Does Debt Relief Work?

Debt relief strategies help reduce your debt burden. The first step in debt relief is to realize you need help to manage your debts. What follows next is choosing the right type of debt relief option suitable for your situation. Bankruptcy can also serve as a form of debt relief, but it has a severe impact on your credit score.

Qualifications for Debt Relief

To qualify for a debt relief program such as debt management or debt settlement, you must prove that you can make monthly payments into a settlement fund that will be used to settle your debt. Typically, your monthly payment for the debt relief program is lower than your total monthly payments on your credit card.

When to and Not to Seek Debt Relief

Debt relief is not for everyone; before choosing the debt relief path, it’s advisable to consider the following:

  • Whether you have tried to settle your debt, but you are not making any progress
  • Whether you are unable to make timely payments on your loan and credit card bills
  • If you’re considering filing for bankruptcy

When Not to Apply for Debt Relief

In some circumstances, some people may not benefit from debt relief. For example, debt relief may not be suitable for you if you aren’t committed to repaying your debts.

It may also not work if you are always adding your debt balance. To start with, you may need to adjust your spending habits to avoid increasing your debts.

Types of Debt Relief

Debt relief is an umbrella term for debt consolidation, debt settlement, and debt management. Here is a breakdown of each type of debt relief option.

  1. Debt Consolidation

Debt consolidation refers to merging your debts to develop a single lower interest loan. There are different ways you can consolidate different debts into a single loan. For example, you can merge all your credit card payments into a new card, significantly if the new card charges little or no interest in the beginning.

  1. Debt Settlement

Debt settlement, like you’ll find  google refers to negotiating with your creditors to pay a lesser amount than what they owe you. The best option is to work with a reputable debt settlement company to negotiate with your creditors on how to settle your debt. The company had the right talent and skills to negotiate lower interest rates, cancellation of penalties, and late payment fees.

When working with a debt settlement company, you deposit your payment in a settlement fund, and the company forwards your payment to your creditor. Debt settlement is one of the best options for debt relief for most consumers.

  1. Debt Management

Another name for debt management is credit counseling. Here you work with a credit counseling company to help you get out of debt. You also hand over your debt management to the credit counseling agency and allow them to deal directly with your creditors. The company can choose to consolidate all your debts into a single low-interest loan.

Unlike debt consolidation, you don’t have to have a superb credit score to qualify for these debt relief options. This makes debt management one of the most sought-after debt relief options for creditors.

How Long Will It Take to Get Out of Debt?

The period it’ll take to get out of debt will rely on several factors, including:

  • The type of debt relief option is chosen
  • Whether you fully adhere to the debt relief the program
  • The amount of debt

Typically you can plan to settle your debt for 2 to 5 years.

What You Should Know Before Applying for Debt Relief

Debt relief programs can help you get out of debt quickly. On the contrary, if you enroll in the wrong program, you may raise your debt level. Before deciding on a debt relief program, consider the following:

  • Interest rate payable
  • The tax implications
  • Fees payable in the program
  • Program duration
  • Scammers in the industry

When selecting a debt management company, beware of scammers in this industry. Instead of helping you overcome your debt crisis, some may land you into deeper debts. It’s crucial to make an informed decision on who to work with. One best option is to check with Better Business Bureau (BBB) or the Attorney’s office in your locality if the service provider is dependable.

For better success in managing your debt, it’s ideal to work with a certified debt specialist who can discuss your unique situation and offer the best advice on the best type to solve your debt problem.

Will Debt Relief Affect My Credit Score?

Debt relief can affect your credit score. The actual impact relies on the type of debt relief and your current credit score. For example, if you choose a debt relief settlement but you had already defaulted on your payment for a while, you’ve already messed up your credit score. By enrolling in the plan, you can do little to change your credit score.

Another example is credit counseling. In this option, you’ll have no impact on your credit, but the advice you get will help you reduce your debt and improve your credit score.

Before settling on a specific debt option, first evaluate it to know if it impacts your credit score. Also, regularly monitor your credit report to know if the program has affected your credit.

Choose an Ideal Debt Relief Program

Now that you understand debt relief: what it is and when you should seek it, it’s crucial to select the best option to help you get out of debt. Our debt experts will negotiate with your creditors to find the best option to settle your debts. They will also negotiate with them for penalties and late fee cancellations.