How Debt Relief Programs Can Help You Pay Your Debts in 2023
7 MIN READ
Published March 23, 2023 | Updated November 27, 2023
If you are one of the millions of Americans struggling to pay your debts and make ends meet, you are not alone.
US household debt has risen to over $16 trillion. That’s almost 50 thousand dollars of debt for every household, causing more people to consider debt relief programs to take control of their finances and work towards a debt-free life.
Debt relief programs can be a viable option to help you get back in control of your finances. These programs are not a quick-fix, one-size-fits-all option. Instead, they are long-term solutions that require dedication but can help you get out of high-interest debt over a few years.
The right program can help you make your payments manageable. Thus, it is important to have a detailed understanding of what these programs are, how they work and if they will be the right option for you.
What are Debt Relief Programs?
Debt relief services can help you make your monthly repayments manageable. It works by replacing multiple debts with a consolidated loan and by negotiating with lenders.
Many programs are also designed to help you benefit from waived fees, lower interest rates, reduced balances, or extended loan terms.
These programs are offered by nonprofit and for-profit institutions and are aimed at helping you become debt free by eliminating, managing or consolidating your debt.
While debt relief services can help you avoid bankruptcy, it is important to understand that there are certain qualification and program completion requirements involved.
Successfully completing a debt settlement program can help you save up to 50% of your original debt before fees.
To find the best debt relief programs for you, it is best to assess your debt-to-income ratio and speak to a professional. A professional counselor can help you take stock of the debt you currently owe, what type of plan will fit your current needs and how much you will be able to pay off.
Do Debt Relief Programs Work?
It’s easy to understand why it is important to get your finances in control before they become overwhelming. But do debt relief programs really work?
There are a number of factors that can impact the success of a debt relief program for borrowers.
For example, if you choose to work with a debt relief company, you will need to ensure that the company is reputable. The industry is rife with scams, so it is important to only work with well-established, reviewed and trustworthy companies.
Always check the reviews of the company at the Better Business Bureau and the Consumer Financial Protection Bureau before you decide to work with a company.
Personal commitment is another important part of a successful program. Most debt relief programs will take a few years to complete successfully and you may face expensive penalties if you do not follow through with the new plan.
However, committing and sticking with your repayment programs means you will be able to pay off your debt sooner for less money.
Types of Debt That Qualify for Debt Relief Programs
The type of debt you currently have will also determine if you will qualify for debt relief programs. There are two types of debt:
- Unsecured Debt is debt that is not backed by collateral. Credit card debt, collections debt, personal loan debt and medical bills are examples of unsecured debt. Generally speaking, unsecured debt works best with debt relief programs. Credit card debt accounts for the most debt in the U.S. at over $10 trillion. For borrowers struggling with this type of debt, relief programs may be a good option.
- Secured Debt is debt that is backed by collateral, such as auto loans and mortgages. These are usually excluded from debt settlement and debt management negotiations. There are fewer options to get relief from these debts.
If you have student or tax debt, there are also programs for you. These government programs can help you reduce the amount of debt that you currently owe to debt collectors, such as the Offer in Compromise by the IRS and the Student Loan Relief Plan through the Department of Education.
Most Popular Debt Relief Programs
There are several different types of debt relief programs that can help you become debt free in 3-5 years of time if you are committed. Two of the most popular options available are debt management and debt settlement.
A debt management plan can help you make a single, manageable payment toward all of your debts. When you enroll in a program, you may be able to receive lower interest rates and have certain fees waived.
You don’t need to take out a new loan or get a credit card with a debt management plan, so your credit scores will not impact your qualification.
It is also important to note that if you miss any of your payments, the concessions can be terminated.
- No need to take out a new loan or credit card.
- Helps you create a realistic and affordable budget so you can pay off your total debt.
- It can help you save on late fees.
- Reduce the interest rates on your existing credit card debt.
- There will be a small maintenance or enrollment fee for enrolling in the program.
- You will need to make the monthly payment consistently.
- You will not have access to any new loans and may have to close your credit cards.
Debt settlement involves negotiating with lenders to settle your debt for less than what you currently owe. You can simply contribute to a new savings account and use it to pay a lump sum to settle your account.
If you have more than $10,000 in unsecured debt and are struggling to make payments, debt settlement can be a great way to pay off your debts and regain control of your finances.
- It can help you avoid bankruptcy.
- It’s often the quickest way to settle large amounts of debt.
- It will allow you to settle your debt by up to about 50% before fees.
Alternatives to Popular Debt Relief Programs
If the options discussed above are not suitable for you, there are a number of other alternative debt relief options that you can choose from.
Sometimes all you need is guidance from a professional credit counseling agency. A credit counselor can take a deeper look at your finances and your budget, explain how it works, and help you come up with a debt repayment plan.
If your credit scores are fair or good, you can qualify to get a lower interest debt consolidation loan to consolidate all your debts into a single monthly payment.
Many credit card companies offer 0% balance transfer credit cards that can also be used to consolidate your credit card payments and make your payment schedule more manageable.
While this is not an ideal solution, sometimes bankruptcy may be the only solution available. Filing for Chapter 7 bankruptcy can help you erase most outstanding debts, such as credit cards, personal loans and medical debt.
There are also other alternatives to Chapter 7 bankruptcy, such as Chapter 11 and Chapter 13, depending on your individual circumstances.
While complete debt forgiveness is very rare, it may be possible to qualify for partial loan forgiveness. Sponsored assistance programs may sometimes be available for some individuals and mortgage relief programs sponsored by your mortgage lender may be available. Check your eligibility for these programs.
Not all debt relief programs may be right for you. Your financial goals, commitment and the resources currently available to you will impact the success of your program.
Before you sign up for any program, ensure that you are comfortable with the commitment you are making and the requirements of the program.
Debt relief programs can provide you with the reprieve you need from heavy debt, but it is important to work with debt settlement companies that will put your needs first. Avoid scams and check reviews about the debt relief company you plan to work with.
TurboDebt is a reputed debt relief company that has helped thousands of clients reduce their debt and ease their financial burden.
Our debt relief professionals are knowledgeable and will work with you every step of the way to help you find a program that is suitable for you. We provide consultations, counseling, and strategic planning services to create an effective plan to help you achieve your financial goals.