Debt has gotten out of hand in the U.S. The average household has $16k in credit card debt, $27k in auto loans, $48k in student loans, and $169k in home loans. We might as well be called the United States of Debt. It’s no surprise so many people are looking for debt relief options.
According to the Federal Reserve, Americans currently carry over $969 billion in credit card debt. That’s a lot of debt. Additionally, Consumer Reports claim that 33% of Americans (individuals not households) carry $10,000 in credit card debt. With that amount of debt, it’s no wonder some people are looking for a little debt relief.
Are there any legitimate debt relief options?
There are options, each with their own advantages and disadvantages. Some require you to get a consolidation loan and some require you to own a home. Some require you to establish a debt management plan or seek the assistance of a debt settlement company, or a certified counselor. They all require you to make a commitment.
If you have tried unsuccessfully to get out of debt and are now ready for some professional assistance, consider:
- Seeking professional help from a certified credit counselor
- Applying for a debt consolidation loan
- Investigating debt settlement
- Filing for bankruptcy as a final option
Compare debt relief options before you commit
If you aren’t able to help get yourself out of debt, there are services available to you that may be able to offer some relief.
Credit counseling services offer assistance with budget development, education, and, most important, debt management plans. Debt management programs help you set aside money to pay off your debts. Do your research and find a reputable company. Make sure the counselors are certified.
There are several types of debt consolidation loans available to consider depending on your specific needs and situation. The purpose is to consolidate all or most of your outstanding debt into a single monthly payment. Debt consolidation loans may be secured by an asset such as your home or car or may be unsecured if you have a good credit rating and credit history.
There are major differences between debt settlement, credit counseling, and debt management programs. Debt settlement companies focus on negotiating with your creditors on your behalf to reduce the amount you owe, sometimes by a very significant amount. Debt settlement can help you if you cannot afford to pay your debts in full.
This should be your last choice. Bankruptcy is a long, difficult process that will live with you for many years to come. There are two types of personal bankruptcy: Chapter 7 or Chapter 13. You must file in federal court. The fee is several hundred dollars. Bankruptcy requires you to either liquidate your assets to pay your debts or to create a repayment plan. To learn more about bankruptcy, visit FederalBankruptcyCourt.
What to look for when comparing debt relief options
Not all debt help is created equal. And neither are all debt relief firms. Walk away from any debt relief firm that:
- Charges fees before settling your debt
- Pressures you to make “voluntary” contributions
- Offers government programs to help pay off personal credit card debt
- Tells you not to communicate with your creditors
- Guarantees your unsecured debt can be paid off for “just pennies on the dollar”
- Won’t give information about their services unless you provide personal financial information, such as credit card numbers and balances
- Doesn’t take the time to review your individual situation
- Won’t teach you budgeting and money management skills
The best debt relief firms:
- Focus on your needs and help you find your way back to financial independence
- Work with you to lower your unsecured debt balances
- Lower your monthly payments and interest rates
- Reduce or even eliminate collection calls
- Offer a better alternative to bankruptcy
Here are a couple of things to consider when looking for a debt settlement company.
Do they have minimum and maximum limits on the amount of debt you can enroll?
Most companies require you to have a minimum amount of debt, which is usually around $10,000. Some lenders, such as Freedom Debt Relief, accept lower amounts. Other companies also have a maximum amount of debt you can enroll, such as $100,000. You will need to find a company with requirements that match your needs.
What is their customer service like?
We typically don’t care about the customer service of a company until we run into problems or have questions. It is important to find out ahead of time about the level and quality of support provided by a company. You can do so by researching the support channels they offer (phone, email, live chat, etc.) and by reading reviews from past customers. Look for companies like Debtmerica Relief and Rescue One Financial which are recommended by our community of users. Other debt settlement firms to consider are Pacific Debt and National Debt Relief.
Finding your way out of debt takes time. However, by seeking assistance from a reputable debt relief organization, you can select the right option for you.
Once you start making good credit decisions and paying off your debt, you will be on the road to rebuilding your credit history and credit score. And your debt relief will lead to stress relief.
Andrew is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.