A debt relief agency can help you get out of debt by negotiating with creditors to pay off your outstanding balances at a lower amount. They can also provide you with tools and resources to change your spending habits and make a plan for repayment. Debt relief is not a one-size-fits-all solution, though, and you may need additional support to break free from debt.
There are several types of debt relief programs available, including credit counseling, debt management plans and debt settlement. It is important to understand the differences between these options, as well as their potential drawbacks, before choosing a debt relief program.
One of the most common forms of debt relief is through a debt consolidation loan, which combines multiple debts into one monthly payment. This allows you to manage your debt more easily by making just one monthly payment, and it can save you money on interest rates and fees. However, a debt consolidation loan can impact your credit score, and it is usually considered a last-resort option.
Another type of debt relief is through a bankruptcy filing, which can eliminate your outstanding debts in exchange for a fresh start. However, it will remain on your credit report for a decade and can limit your ability to borrow in the future. This can make it challenging to obtain a mortgage, car loan or personal loans. In addition, filing for bankruptcy can have serious long-term consequences, such as the inability to find employment and housing.
In some cases, the government will offer debt relief through specific programs for low-income people. For example, the IRS Fresh Start program helps taxpayers get rid of tax debt and the Public Service Loan Forgiveness program offers forgiveness for qualified hospital workers, firefighters and first responders. Other government programs offer help for education loans, student loan refinancing and homebuying assistance.
What are the best debt relief companies?
A reputable debt relief company will be licensed and insured, have a strong track record of customer satisfaction, and offer transparent fees. They will also be willing to work with you to determine your eligibility for different options such as debt consolidation, debt settlement and student loan refinancing. They will never charge you upfront fees, and they should be able to negotiate a settlement that works for you.
The best debt relief companies will focus on unsecured debt, such as medical bills, credit card debt and personal loans. Some will also negotiate with lenders to settle delinquent mortgage debt. The top debt relief companies will be able to offer you a free consultation and help you create a personalized debt reduction plan.
To protect consumers from debt relief scams, the Consumer Financial Protection Bureau maintains a database of complaints against debt relief providers and will check for a negative history with the Better Business Bureau. However, the CFPB recommends that you do your own research to find a debt relief company that fits your needs and budget.