Dealing with debt can feel overwhelming, but you don’t have to face it alone. Reliable help is available from a variety of sources, including for-profit and non-profit organizations. The key is finding support that is transparent, ethical, and focused on your long-term financial well-being.
Understanding where to turn and what to expect can make all the difference in navigating your debt challenges effectively. Here’s what you should know about the options available.
If You Need Help With Debt Right Now
When debt begins to feel stressful, take action sooner rather than later. Waiting will only cost you more money on the back end.
Start by getting a clear picture of your income, expenses, and total outstanding debt. Not only will this eliminate the fears that come with uncertainty, but it’s also essential for informing your next steps.
Consider getting help from a nonprofit credit counseling agency. They can often help you get stabilized at no cost, providing services like:
- Reviewing your income, expenses, and debts
- Creating a manageable monthly budget
- Discussing options for debt management
Common Paths People Use to Get Debt Help
Once you’ve taken stock of your situation, there are many different ways to get out of debt, with the best solution depending on your unique circumstances. Here are some of the most popular approaches to consider.
1. Debt Management Plans (DMPs)
Typically arranged through nonprofit credit counseling agencies, a DMP lets you make one monthly payment to the agency. They distribute the funds to your creditors and may negotiate lower interest rates or waived fees.
DMPs are typically arranged through nonprofit credit counseling agencies. They let you consolidate your monthly debt payments into one payment to the agency, which then distributes the funds to your creditors. Agencies often negotiate on your behalf for lower interest rates or waived fees to make repayment more manageable.
Best for: People with steady income and multiple unsecured debts like credit cards.
Considerations: These plans can take several years to complete and hurt your credit initially. Providers may also charge setup or monthly fees, and missing payments can cost you your negotiated terms.
2. Debt Consolidation Loans
A consolidation loan combines several debts into one new credit account, ideally with a lower interest rate.
Best for: Borrowers with good enough credit to qualify for a new account with favorable terms.
Considerations: If you don’t stop spending with your old credit accounts once the new loan is in place, your total debt may grow instead of shrink.
3. Debt Settlement
You or a debt relief company may be able to negotiate with creditors to accept less than the full amount owed. Known as debt settlement, this typically involves ceasing payment and making monthly deposits into a dedicated account until there’s enough to settle each debt.
Best for: People in serious financial distress or with accounts already in default.
Considerations: Settlement can impact credit scores and may result in forgiven debt being treated as taxable income. Fees vary but are usually based on the amount enrolled.
4. Bankruptcy
Bankruptcy is a legal process that can result in your debts being discharged or restructured under federal law.
Chapter 7: Erases certain unsecured debts after liquidating non-exempt assets.
Chapter 13: Creates a structured repayment plan lasting three to five years.
Best for: Individuals whose debt is unmanageable even with other options.
Considerations: Bankruptcy remains on your credit report for up to seven or ten years and comes with legal costs.
How to Choose a Legitimate Debt Relief Company
Not all debt relief companies are created equal, and some you encounter may actually be scams. As a result, it’s important to do your due diligence before working with one. Here are some steps you should take:
- Proper accreditation: Check for recognition from organizations, such as the Association for Consumer Debt Relief (ACDR).
- State licensing: Verify that the debt relief company holds the licenses required to operate where you live.
- Written disclosures: You should receive clear documents outlining fees, timelines, and all potential risks before you agree to anything.
- No pressure tactics: A legitimate company gives you time to review information and decide without being pressured or rushed to take advantage of “special deals.”
- Clear communication: Reputable firms explain how their services affect your credit, taxes, and overall finances.
Be wary of red flags like the following:
- Demands for upfront payment before services begin
- Refusal to provide written terms or verify credentials
- Claims of access to new or “secret” government programs that eliminate debt
Before sharing personal information, check each company’s Better Business Bureau (BBB) page and read verified customer reviews. You can also contact your state attorney general’s office to review additional complaints.
Final Thoughts
Choosing where to get help with debt requires careful consideration, whether you look for a nonprofit credit counselor or a licensed for-profit company. Whichever you prefer, watch out for red flags like pressure tactics and exaggerated promises. Look for organizations that prioritize transparency and empower you to make informed decisions.
