Debt Relief Options: Get Out of Debt and Back to Financial Security
- You can get out of debt, even if you can’t afford your current payments. The strategies that help you get out of debt are called debt relief.
- The best first steps are to contact the companies you owe and to schedule a meeting with a credit counselor. You can also check your debt consolidation loan rates with no impact to your credit.
- If you’re in debt that you just can’t afford to pay off over the next several years, you can consider more dramatic solutions, like filing for bankruptcy or debt settlement.
If you have too much debt and can’t see a way out, you’re in the right place. It is possible to get out of debt, even when your financial situation feels hopeless. The best way forward is to find the right solution for you and commit to it.
We’ve compiled the top five ways to overcome debt and get back to living your life. You can’t deal with all of your debt in one day, but you can take the first step. Keep reading to find out how.
Contact your creditors
- Best for: Everyone
- First step takes about 10 to 20 minutes
No matter how much debt you have, it’s worth a try to ask if the company you owe money to offers debt relief or debt forgiveness programs.
You could qualify for extensions, modified payment plans or changes to monthly due dates. The catch? Companies don’t usually tell you about these programs — it’s up to you to ask for them.
Here’s what you need to know about hardship programs for different kinds of debt:
- Mortgages: If you’re a homeowner, a mortgage modification can help keep you in your home. You may end up owing more money in exchange for more affordable monthly payments.
- Credit cards: For credit card debt relief, call your issuer and ask them to waive or reduce late fees. You can even ask to reduce your credit card APR, which could save you hundreds or thousands of dollars in interest.
- Personal loans and auto loans: Personal loan companies sometimes offer special repayment programs for people struggling to make payments. You may also get out of a car loan you can’t afford by renegotiating your loan terms. Your lender could temporarily lower your monthly payment, pause your loan payments or even extend your loan term.
Don’t be afraid to ask for help. Your loan company just wants you to pay back what you owe, so the person on the other end of the line may be willing to help you find terms that work for you.
- Haven’t spoken to creditors to explore your debt relief options.
- Are behind on payments or need a different payment due date.
- Have debt that hasn’t yet gone to collections.
- Can consistently make smaller payments over a longer period.
Get started
- Check your recent bills. Look for instructions for reaching out to creditors. You can find contact information on your bill, online or on the back of your card, if applicable.
- Make the call. When you call creditors, explain your situation — whether you’re dealing with unemployment or an emergency — and ask what debt relief or discount programs they offer.
- Mention on-time payments. If you have a track record for on-time payments, use that as leverage when requesting payment assistance.
It is possible to negotiate medical bills. Call the medical billing department, ask for an itemized list of costs and dispute anything that doesn’t look right. Be honest that you’re struggling with payments. Ask about any payment assistance programs, or if they’ll reduce what you owe.
Work with a credit counselor
- Best for: Everyone
- First step takes 2 minutes
Credit counseling, also known as debt counseling, helps people manage their money and debt. Credit counselors can help you adjust your budget, prioritize your bills and work with your creditors to stop them from sending you to collections through a debt management plan.
These debt management plans consolidate your monthly debt payments into one. You’ll make a single monthly payment to your counselor, who then distributes it to your creditors.
The counselor works with your creditors to potentially lower interest rates and waive or reduce fees, allowing you to get a better handle on your debt.
- Aren’t sure where to start to pay off your debt.
- Want financial advice from a trained, unbiased professional.
- Need someone to walk you through your debt step by step.
- Are ready to stick to a debt management payment plan for three or more years.
- Are comfortable closing some lines of credit to limit additional debt during the debt management program.
Get started
- Find a counselor. Fill out a form with the National Foundation for Credit Counseling (NFCC) to be matched with a credit counselor.
- Meet your counselor. Be prepared to meet with a counselor for at least 30 minutes. Before your meeting, pull information like your household income, monthly expenses and total debts.
- Ask questions. Write down all of the questions you can think of — for example, what solutions are best for your situation. If the counselor recommends a debt management program, ask about how it works and how much it costs. And if you’re worried you can’t afford fees, mention this!
Learn more about credit counseling vs. debt consolidation.
Consolidate your debt
- Best for: People who have several debts and good to excellent credit
- First step takes 2 minutes
Debt consolidation uses a new loan to combine several debts into one. The debts can be anything from personal loans to credit cards. The goal here is not only to consolidate bills under one payment, but to reduce the overall interest rate to save money.
You can get lower monthly payments when you choose a longer repayment term for your consolidation loan. While this does keep you in debt for longer and increases the amount you owe, it could mean the difference between an affordable monthly payment and one that you just can’t keep up with.
Debt consolidation is typically done using a debt consolidation loan (also known as a personal loan) or balance transfer credit card.
Some lenders offer bad credit debt consolidation loans, but these loans are typically expensive. Explore getting a cosigner to increase your approval odds — otherwise, a secured loan may be a more affordable option.
- Can get more affordable terms with a loan or line of credit than what you’re currently paying.
- Can avoid new debt after consolidating your old debt.
- Can afford the monthly payments on your new credit account or loan.
Learn more about balance transfers vs. personal loans.
Get started
- Check your rates. You can check your rates directly with a debt consolidation lender or use the LendingTree marketplace to see rates from up to five trusted lenders at one time.
- Shop your offers. It’s important to get more than one loan offer, since getting at least six loan offers can save you up to $3,138. (LendingTree users receive 18 personal loan offers on average!) Compare your offers side by side to see which one will save you the most money.
- Get your money. Once you accept an offer, fill out the loan agreement with your lender. And when all the paperwork is signed, your lender will send the money either directly to you or to your creditors.
Settle your debt
- Best for: People in overwhelming debt who don’t want to file for bankruptcy
- First step takes 2 minutes
Debt settlement is just a term for negotiating to pay your debts for less than they’re worth. You can do this yourself, or you can hire a debt settlement company to do it for you. Debt settlement companies typically charge 15% to 25% of the debt settled.
Debt settlement programs ask you to stop making payments in an attempt to force creditors into accepting a lower payoff amount. This strategy isn’t guaranteed to work, and it’ll very likely hurt your credit.
Further, your creditor may not be willing to negotiate at all, so you’ll risk being sent to collections — or even sued by debt collectors — for not making payments.
If you decide debt settlement is worth the risk, avoid debt relief scams by working with a reputable debt settlement company, like National Debt Relief or J.G. Wentworth.
- Truly can’t afford to pay off your debts.
- Are willing to gamble that your creditor will agree to a lower payoff amount.
- Don’t want to file for bankruptcy (though bankruptcy may be a better option in many situations).
- Are currently experiencing a financial hardship you can document for creditors.
Learn more about debt consolidation vs. debt settlement.
Get started
- Talk to a credit counselor. Before you dive into debt settlement, speak with a credit counselor to make sure you’ve considered all of your options.
- Find a reputable debt settlement company. To see if a debt settlement company is legit, read debt settlement reviews from real LendingTree users. You should also check reviews on Trustpilot, Google and Consumer Affairs.
- Fill out a form. Debt settlement companies typically have forms on their websites. Fill out the form to get started.
File for bankruptcy
- Best for: People in overwhelming debt
- First step takes 2 minutes
If full repayment of your debt seems completely out of reach, then it’s likely time to consider bankruptcy. Though bankruptcy stays on your credit report for seven to ten years, the average credit score goes up 69 points one month after filing and 89.9% of bankruptcy filers have a new credit account one to two years after filing.
People typically file for Chapter 7 or Chapter 13 bankruptcy. Here’s the difference:
- Chapter 7 bankruptcy: This is a liquidation bankruptcy, where a professional helps sell your eligible assets to pay off some of your balances. Any remaining unsecured debts are discharged (or forgiven).
- Chapter 13 bankruptcy: Chapter 13 bankruptcy allows you to create a plan to repay your debts over three to five years. Any remaining balances are discharged (or forgiven) once the plan is completed.
- Have spoken to your creditors and a credit counselor, but still can’t make payments.
- Just can’t afford to pay off your debts.
Learn more about debt consolidation vs. bankruptcy.
Get started
- Talk to a credit counselor. You’ll need to work with a credit counselor first in order to file for bankruptcy.
- Talk to a bankruptcy attorney. Consult a bankruptcy attorney to help you figure out what type of bankruptcy you’ll qualify for and how to file. Find a reputable attorney in the member database of the National Association of Consumer Bankruptcy Attorneys (NACBA).
- File for bankruptcy. The next step is to file a bankruptcy petition. Learn more about filing for Chapter 7 bankruptcy and filing for Chapter 13 bankruptcy.
Which debt relief option is right for you?
No matter how much debt you have, start by contacting your creditors, meeting with a credit counselor and getting quotes for debt consolidation loans. You may be surprised at how much cheaper your payments can be with these lower-risk strategies.
But if you’re struggling to make ends meet, you’ll likely need to consider debt settlement or bankruptcy. Your credit counselor can walk you through your options and help you decide what’s right for you.
Here’s a quick reference table to help you decide where to start.
| Best for | Cost | Works for | Risk level | |
|---|---|---|---|---|
| Contact creditors | Getting back on your feet after a temporary setback | Free | Credit cards Personal loans Mortgages Student loans Auto loans | Low |
| Credit counseling | Step-by-step guidance to get out of debt | Free or low cost | Credit cards Personal loans | Low |
| Debt consolidation | When rates are low and you’ve improved your credit | Use a debt consolidation calculator to see how much you’ll spend (or save) | Credit cards Personal loans Student loans | Low to medium |
| Debt settlement | Potentially paying less than you owe | 15%-25% of the amount you owe | Credit cards Personal loans | High |
| Bankruptcy | When you’re in over your head and can’t afford to pay back your debt | You’ll pay for court costs and any attorney fees | Credit cards Personal loans Mortgages (though you’ll still owe money) Student loans (must meet certain qualifications) Auto loans | High |
It’s normal to feel overwhelmed and anxious about tackling your debt. You’re learning about new (and sometimes confusing) ways to handle your money while making an important decision. And although debt is extremely common and often unavoidable — 60% of Americans with credit card debt say they couldn’t avoid it — debt often comes with shame.
No matter which debt relief option you choose, you’re not alone. You’ll have people — like credit counselors — and resources to help you get where you need to be.
Resources
No matter your situation, we’ll find the best solution together. Just a few clicks (or taps) away!