Is getting control of your debt one of your New Year’s resolutions for 2025? Seeking out debt relief services is a smart way to reduce your debt load, increase your credit score, and plan for your financial future. The good news is that you don’t have to do it alone. If you are stressed out and overwhelmed by debt, or if you are looking for opportunities to pay less debt overall, then debt relief services can help.
As you make plans for 2025, an important question to ask yourself is which debt relief option might be best for you. Consider the types of debt you carry, how much debt you have, and what about the debt is causing you the most problems to help guide your decision. Providing debt management assistance, DebtBlue is glad to help you explore debt relief and make the right decision for your needs and plans in the new year.
Here's what you need to know.
What is Debt Relief?
Debt relief is a set of methods you can use to reduce your debt, minimize the negative effects of debt, and gain control over your debt repayment plan. It can help lower your stress and put you on a set path to become debt-free in a few months to a few years of structured financial management. There are several types of debt relief methods that you can put into play, and you can use one or multiple methods as part of your overall debt relief plan.
How Does Debt Relief Work?
Debt relief is typically offered as a service. A professional debt expert will help you assess your finances and determine the strategies that will likely get you the best results and provide the optimal debt elimination plan. Your debt expert may negotiate debts on your behalf, secure a consolidation loan with a banking partner, or offer counseling as you navigate strategic debt repayment.
It is also possible to pursue DIY debt relief, but this should be done carefully to avoid pitfalls and you may miss some opportunities that can be reached through professional expertise and business connections.
- How does debt relief affect my credit score?
Debt relief will typically cause your credit score to rise. However, specific methods can cause a temporary dip in your credit score before it improves.
- Can I still use credit cards while on a debt relief program?
- Yes, but there may be conditions. Debt relief programs do not limit your financial options, but may ask you to stop using cards with a high balance. You can still use debt-friendly cards like Advantage Boost as a safe and convenient payment options in your daily life.
- Will my creditors continue to contact me while on a debt relief program?
It depends on the debt relief program you choose. Some debt relief, like consolidation loans or negotiation, can stop creditors from contacting you. Debt relief professionals can also help you make a formal request not to be contacted while you complete your debt repayment plan.
- Are there any tax implications for using debt relief services?
Typically, there are not tax implications for a debt relief service.
For Your Information
Types of Debt Relief Programs
There are several types of debt relief program that you can engage in to reduce your debt and regain control. These include debt consolidation, debt sebtlement, debt management plans, bankruptcy, and debt forgiveness.
Debt Consolidation
Debt consolidation allows you to use a loan or line of credit to pay off multiple debts at once, then pay off the single loan over time. Most debt consolidation uses a special type of personal loan that offers lower interest rates and a manageable repayment schedule. However, this method can also be implemented with tactics like a credit card balance transfer or a peer-to-peer loan.
Debt consolidation simplifies your debt repayment, clears multiple debts from your credit record, and transforms bad high-interest debt into a loan that can improve your credit score as you repay it.
Debt Settlement and Negotiation
Debt settlement is the process of negotiating a lower amount owed in return for a promise to repay the remaining balance on a specific schedule. Debt settlement must be managed one debt at a time. If you are willing to work with each one of your creditors, you can reduce the total amount you owe.
While not all creditors will accept the offer to settle, an expert debt negotiator with business connections can often secure an advantageous settlement with multiple creditors to improve your debt management plan.
Debt Management Plan
A debt management plan is when your debt relief guide helps you organize your debts to repay them in a strategic fashion. This is a service offered primarily by credit counseling agencies. While debt management can include consolidation or settlement, the core focus of a debt management plan is paying off your debts in a way that you can easily manage and complete within a set amount of time.
Bankruptcy
If debt repayment is not an option, you can file for Chapter 13 or Chapter 7 bankruptcy. This path to debt relief has the most long-term consequences, including court ordered consequences like surrendered assets. However you are protected from being sued by creditors as a result of the process. Debt counselors will try to help you avoid bankruptcy and resolve your debts with methods that keep you in control, if possible.
Debt Forgiveness
Some government programs can help you access debt forgiveness. This can mean either that the debt is voided or that the program pays your debt. Either way, the debt is cleared from your credit report and the creditor will no longer contact you.
- Is debt relief the same as debt consolidation?
Debt consolidation is one of several methods that can be part of a debt relief program.
- Can I include all types of debt in a debt relief program?
No, debt relief strategy works for all types of debt. However, a combination of methods can usually address all or most of your debts.
The Pros and Cons of Debt Relief
The advantages of debt relief are easy to see. You can build a plan to pay off your debts, which will help you reduce stress, achieve financial freedom, and imrove your credit score. While each debt relief method is unique, each one offers it’s own set of benefits. But you may also be wondering “what are the risks associated with debt relief programs?”
Let’s take a closer look at the pros and cons of debt relief.
Pros
- Take control of your debt
- Reduce debt through negotiation and manageable repayment
- Gain freedom from creditors
- Increase your credit score
Cons
- Accepting fixed repayment terms
- Temporaily taking on more debt with some methods
- Temporary reduction in your credit score with some methods
You have options, and we're here to help!
Finding the Right Debt Relief Program
How do you choose the best debt relief program to help you with your debt management plan? There are many businesses that offer debt relief and each likely provides different debt relief programs to choose from. Each program includes one or more debt relief methods like consolidation, settlement, and so on. Choosing the right debt relief program is an important process of assessment and strategy-building based on your unique debt portfolio and personal needs.
Assessing Your Financial Situation
Start by taking a detailed look at your finances. Lay out your debt portfolio, your income, and what you are prepared to handle in terms of monthly repayment obligations. Your debt counselor will help you put your financial situation into perspective and compare your needs to the available debt relief programs.
- How do I know if I need debt relief?
If it has become difficult to pay your debts or if high interest rates are making repayment impossible, a debt relief program can help you regain control and gt on track for eliminating your debt.
Researching Different Programs
Next, research the debt relief programs you can choose from. Compare and contrast the different options, including the special opportunities that may be available through your debt relief provider. This may include bank partnerships, negotiation services, and personalized debt repayment plan building tailored to your needs.
Consider how each program could help you, resolve your specific debt portfolio, or provide a repayment plan that works for your household budget.
- What are the different types of debt relief options available?
- Debt consolidation
- Debt renegotiation and settlement
- Debt repayment plans
- Select debt foregiveness programs
- Debt counseling
- Bankruptcy
- How long does it typically take to complete a debt relief program?
On average, a debt relief program can take 2-4 years to complete, but this varies depending on the total debt, the relief strategies used, and the rate of repayment.
Government Debt Relief Programs
There are a few government debt relief programs that can offer debt reduction, debt forgiveness, or sponsored debt counseling for a limited number of eligible candidates. You can ask your debt relief service about government programs you might be eligible for. Eligibility can be determined by types of debt, demographics, income level, and other various factors.
- What are the qualifications for government debt relief programs?
- Different programs have different qualifications. These may include the type of debt, your income level, your occupation, how much you owe, and which program you are trying to access.
Evaluating the Credibility of a Program
One unfortunate fact is that there are many debt relief scams. While you can get a head start on debt resolution with the help of professional debt relief service, it’s important to avoid getting scammed. You will need to evaluate the credibility of a program before you sign up or allow them to influence your financial decisions and commitments.
- What is the best way to find a reputable debt relief company?
Look for debt relief companies with good online reviews who do not promise absolute or complete results. Positive reviews, accredidation, and realistic policies will reveal the legitimacy of a debt relief company.
Understanding Fees and Charges
Take the time to understand how the debt relief program charges for their services. Optimally, look for a service that does not charge until they reduce your debt burden or help you embark on a complete and beneficial debt management plan. Your ultimate goal is to come out financially ahead, and high fees or up-front charges can work against that goal.
- How much does debt relief typically cost?
It depends. Some services charge a flat fee, some charge a percentage of the debt managed, some are free.
Reading Reviews and Testimonials
Lastly, you can get a useful perspective on the legitimacy of a debt relief program by reading reviews and testimonials online. Real stories from past clients can give you a detailed view of how each debt service works and the benefits they provide. Many and detailed reviews can verify the legitimacy of a service, as well.
Avoiding Debt Relief Scams
If the credibility of a debt relief service doesn’t check out, you may have encountered a debt relief scam. It’s important to identify and protect yourself from scams whenever you are pursuing a debt relief program.
- How do I avoid debt relief scams?
Never accept too-good-to-be-true promises, pay up-front, or put your finances in someone else’s hands. Always review any debt relief program before you take part and approve each step before moving forward.
Warning Signs of a Debt Relief Scam
- High costs
- Up-front fees
- They call you and pitch hard
- They promise to resolve "all" your debts
- They make too-good-to-be-true promises
- "Pennies on the dollar" - a phrase often used by fake debt relief services to suggest that you'll only pay a small fraction of your debt.
How to Protect Yourself from Scams
Always verify a debt relief program or provider before you sign a contract, pay a fee, or give anyone else control over your finances.
Reporting a Debt Relief Scam
If you have been targeted by a debt relief scam, you can report this criminal activity to ReportFraud.ftc.gov. This can help to reduce the total number of debt relief scams that can target you and others in the future.
Finding the Best Debt Relief for Your Needs
Choosing a debt relief program is about planning the future of your finances. This will be the strategy by which you reduce your debt, take control of your finances, and start rebuilding your credit score. There’s no doubt that debt relief can be a helpful tool, no matter which program best suits your financial needs.
Start by doing your research before you choose a provider and a program. Be careful to avoid debt relief scams and manage your debt attentively once you have embarked on a program. Call DebtBlue or fill out the webform on the homepage to speak with a debt specialist about your debt relief options.