Key takeaways

  • Debt relief is a restructuring of debt to make it easier for you to pay it back.
  • Debt consolidation, debt settlement and debt management plans are some forms of debt relief.
  • You can get debt relief from lenders, debt relief companies and credit counseling agencies.
  • The best debt relief strategy for your situation will depend on three main factors: the type of debt you have, your credit score and financial situation.

High inflation, along with a rising rate environment, has pushed many Americans to rely more on debt to keep up with household spending. This has led to near record high balances in both credit cards and unsecured loans, according to TransUnion.

If high balances are keeping you up at night, debt relief could be the right solution for you. That said, debt relief can come from multiple sources, each catering to different types of debt, credit scores and overall financial situation. Understanding how they work is key to selecting the best one for your particular needs.

Getting debt relief through a debt consolidation loan

If you’re struggling with different kinds of unsecured debt, such as credit cards, personal loans and medical bills, debt consolidation may be worth exploring. Debt consolidation loans are a type of installment debt, meaning that they carry fixed interest rates and a set repayment period.


You can get a debt consolidation loan through banks, credit unions and online lenders.

When you take out a debt consolidation loan, you roll multiple debts into a single account. This new account can usually have a repayment term between one and seven years, depending on the lender, and potentially a lower interest rate than what you’re currently paying between all your debts. Some lenders that offer debt consolidation loans will pay the amount you’re approved for directly to your creditors, while others will send you the money so you can do it yourself.

Although many debt consolidation lenders allow you to qualify for a loan with a credit score as low as 600, you’ll need a credit score of at least 700 to secure the most competitive rates. That’s why this debt relief solution is best suited for those who still have their credit in good shape.

Getting debt relief through a balance transfer card

Just like debt consolidation loans, balance transfer credit cards allow you to combine multiple debts into a single account. However, balance transfer credit cards only allow you to consolidate credit card debt, plus you’ll need good-to-excellent credit to qualify for the 0 percent annual percentage rate (APR) introductory offer.


Many credit card issuers offer balance transfer credit cards. Check with institutions where you already have accounts to see if you can land a good deal.

If you’re approved for a balance transfer credit card, the credit card issuer will ask you to list all the credit account numbers that you wish to pay off, and they’ll send the money directly to them. Depending on the company you’re working with and your particular offer, you may have six to 18 months to pay your balance in full, without interest.

The big caveat is that if you fail to pay off your balance in full by the time the 0 percent APR introductory offer expires, interest will apply to that amount. This could become an issue, depending on how much debt you’re carrying, considering that the average credit card has an interest rate of upwards of 20 percent, as of August of 2023.

Getting debt relief through debt settlement

If you have over $7,500 worth of unsecured debt and your credit is in bad shape, then seeking a program through a debt relief company may be your best option.


Debt relief companies, also referred to as debt settlement companies, work with your creditors to negotiate better terms for your credit accounts in exchange for a fee.

With a debt relief company, you can typically pay off your balances in under five years. However, this comes tied to negative impacts on your credit, as most companies ask you to stop payments to creditors for them to be able to work with you. That is because creditors are more likely to settle your debt from less than what you owe if you’re already struggling with your monthly bill.

Additionally, the fees charged by these companies can be upwards of 25 percent of the total amount enrolled. You may also have to pay maintenance fees for an account to make monthly payments into that the company then uses to pay your creditors.

Getting debt relief through a debt management plan

With a debt management plan, you’ll get an initial consultation with a credit counselor, who will evaluate your credit report, current debts and income, to come up with a plan to tackle your debts in a couple of years.


Although debt management plans are offered by both for-profit and nonprofit credit counseling agencies. It’s always best to go with the latter, if possible.

Just like debt relief companies, credit counseling agencies work with your creditors to negotiate a lower payment on your behalf. You’ll typically be charged a setup fee, in addition to a monthly fee for these services.

The upside of working with a credit counseling agency is that you’ll get the tools to develop healthier money management skills to avoid ending up in a dire financial situation in the future. Likewise, credit counseling agencies don’t have a minimum credit score requirement to work with you, so it works for consumers with different credit profiles.

What about bankruptcy?

Although bankruptcy can provide some much-needed debt relief by wiping away your debt and allowing you to start fresh, it comes with long-lasting consequences that can drag down your credit score for up to 10 years.

Filing for bankruptcy could hinder your ability to secure affordable credit products in the future, as many lenders will see you as a higher risk. As such, bankruptcy should only be pursued as a last resort.

The bottom line

Debt relief can come in several forms, including debt consolidation loans, debt settlement negotiations, and debt management plans. As a last resort, bankruptcy can help some borrowers — though it does not erase all types of debt, and can ding your credit score for up to 10 years. The option that will be most helpful to you depends on your personal situation, behaviors and tolerance for long-term impact to your credit.