Those facing financial hardship often turn to personal loans to cover expenses. However, this can sometimes backfire, and you may end up with more debt than you started with. Fortunately, personal loan debt relief can help.

Americans owed $249 billion in personal loan debt in Q3, 2024, with an average debt per borrower of $11,652. Whether you have borrowed funds to pay off debts, deal with unexpected expenses, or for home improvement, multiple options are available in 2025 to pay off your personal loans.

4 Ways To Pay Off Your Personal Loans

Having debt hanging over your head can have a negative impact on your well-being. Fortunately, there are a number of things you can do to pay off your personal loans faster.

1. Make Extra Payments

One of the easiest and fastest ways to deal with personal loan debt is by making more than the minimum payment each month. This will help you pay off the loan faster and save money on the loan interest. 

Take a look at your budget and determine how much extra you can pay towards your personal loans. You can set up autopay in your bank account for the extra payments. This option will only work for borrowers who have the means and extra funds to pay their loans. Otherwise, you risk falling short at the end of the month.  

2. Refinance Your Loan

Refinancing your personal loan to a lower-interest loan can help you save a considerable amount in interest. It can also help you pay off your debt faster because a higher amount of your monthly payment will be going toward reducing principal rather than just paying the interest.

Shop around for loan options that offer a lower APR range than what you are currently paying, then compare all your options.

Make sure to check if there are any prepayment penalties before you commit to a particular loan. You can discover many refinancing options with much lower rates if you have excellent credit. Ask if you’ll require co-signers to qualify for a refinance loan.

Another way to do it is through personal loan debt consolidation. This is a viable option if you have multiple personal loans in smaller amounts. Research your loan offers and get prequalified to find the best possible personal loan rates for a debt consolidation loan. 

The loan application process is quick and straightforward. Loan funds may often be disbursed on the next business day. 

Another option is a 0% balance transfer credit card. If you choose this route, it is important to check for balance transfer fees. These are one-time charges for the convenience of moving your balances over to your 0% balance transfer card. 

Typically, balance transfer fees range from 3% to 5% of the balances moved. Just be certain you can pay the balance off before the 0% interest period expires to maximize the benefit from this form of debt refinancing.

3. Talk to Your Lenders

Sometimes, all you need are small changes to your repayment terms to get a handle on your financial situation. Reach out to the credit department of the bank, credit union, or finance company that issued your personal loan and explain your situation. 

Some lenders and banks may have a hardship program if you have a relatively good credit history, but eligibility criteria can vary between lenders. A hardship program may relieve temporary situations like illness or unemployment.

If you are eligible for a hardship program and have a good payment history, your creditor may waive off fees or offer an affordable fixed interest rate to make repayment manageable.

4. Seek Personal Loan Debt Relief

If none of the options listed above work for you, or if you are really struggling to keep up with debt payments, it may be time to take some serious measures. Consider debt resolution programs. Ask your debt relief company about the minimum credit score required to enroll in a program.

Debt management plans offered by nonprofit or for-profit organizations can help you negotiate new repayment terms with your lenders. They can help negotiate lower interest rates and waive late payments or penalties. 

While enrolled in the program, you may have to close some lines of credit and will not be able to open new ones. Debt management usually does not involve assistance with new loan approval, so it is suitable for those with poor credit.  

Personal loan debt settlement is another option where you can work with an organization that can negotiate a settlement on your behalf. This works by getting your lender to agree to a reduced payment on your account balance. Typically, you settle your account in full in exchange for about 50% of your current debt balance, paid as a lump sum.

A last resort option is to file for Chapter 7 or Chapter 13 bankruptcy, which can help you restructure your debt or liquidate your assets to pay off your debts. The remaining unsecured debts can be erased.

Can Personal Loans Be Forgiven?

Personal loan lenders are not inclined to forgive loans, so these options are not easy to come by. If you are struggling to make the minimum payments on your personal loans, there are other options available, such as debt consolidation, debt management, and debt settlement.

Personal loan debt forgiveness is when a lender erases or forgives all or at least a significant portion of your debt. It is important to note that debt forgiveness will not necessarily erase all of your debt. In most cases, however, settling a personal loan debt for less than what you owe is possible.

Can Personal Loans Be Included in Debt Relief?

Most debt relief programs are geared towards unsecured debts, where debts are not backed by any kind of collateral. Instead, they are issued based purely on your personal ability to repay.

This means that personal loans can be included in debt relief programs. 

Personal loans are usually borrowed to pay down debt, refinance high-interest credit card debt, make significant purchases, and/or make home improvements. Most personal loan accounts are issued to subprime borrowers by online lenders.

If you are at risk of delinquency or are already delinquent on your personal loan, you may be eligible for debt relief. 

How Much Can Personal Loan Debt Relief Cost?

Costs of personal loan debt relief will vary depending on which option you choose. For example, debt settlement companies typically charge 15% to 25% of enrolled debts. This fee can only be charged after your debt is settled. It cannot be charged before they show you real results by negotiating a genuinely beneficial debt settlement for you on your behalf.

Debt settlement also involves tax costs. The amount of forgiven debt is generally considered to be taxable as ordinary income by the IRS for the calendar year in which you are relieved of the debt.

However, if you clearly have more liabilities than assets, you can apply to have the IRS consider you insolvent. If you can demonstrate insolvency, you may not have to pay any past due taxes you may owe from prior years’ tax filings.

“The Internal Revenue Service (IRS) generally considers a forgiven debt the same as receiving income, and you may be required to report it on your federal income tax return,” explains Brad Reichert, a debt expert and the founder and managing director of Reichert Asset Management LLC. “Tax consequences depend on the type of debt forgiven and your individual financial situation, but in general, the amount of forgiven debt is typically considered taxable as ordinary income,” he adds.

“For example, if you negotiated with a creditor to settle an existing $10,000 debt for less than the full amount owed at $6,000, the $4,000 difference between the original debt and the lump-sum settlement amount may be treated as ordinary income to you for that tax year,” Reichert shares.

If you opt for monthly monitoring services through a credit counseling agency, monthly costs will typically be $25-$50. An hourly session with a credit counselor for a detailed overview of your finances may cost $75+.

Does Personal Debt Relief Hurt Your Credit?

Personal debt relief may impact your credit scores, depending on the option you choose and what your score was, to begin with. If you are already behind on your personal loan payments, have incurred late fees, or are maxed out on your credit cards, you may already have bad credit. In which case, it may not hurt your credit much more than it is damaged already.

Personal loan debt settlement may provide you a way out of a difficult situation, even though it may negatively impact your credit report. It may also help you avoid bankruptcy, which has a much more severe and longer-lasting impact on your credit.

Programs like credit counseling and debt management plans have minimal or no impact on your credit. Weigh all your options carefully before you opt for a personal loan debt relief option. You should also continue to monitor your credit regularly to keep track of changes. 

How To Get All Your Debt Into One Single Payment

If your credit scores are good, but you’re finding it difficult to keep up with multiple installments with different due dates, you may want to consider personal loan consolidation. 

This will allow you to consolidate all your debts into a new loan and make a single payment each month. A debt relief company can help you find the best debt consolidation loans at the lowest rates.

A fixed-rate consolidation loan with a lower annual percentage rate can be helpful if you are dealing with high-interest debts. This means you can save hundreds of dollars on interest and pay off your debt faster.

Consolidation loans usually require a credit check. Credit unions and banks will typically look at your debt-to-income ratio and your creditworthiness before approving your personal loan.

Talk to an Experienced Professional To Determine the Right Personal Debt Relief Option for You

With so many different personal loan debt relief options available, it is easier than ever to ease your financial burdens. A reputed, experienced debt relief company can help you find a debt relief option that is ideal for your current circumstances.