Debt relief: programs, companies and loans compared
Debt relief means four different things: a consolidation loan, a debt management plan, debt settlement or bankruptcy. What each does to what you owe.
Debt relief is a sales word that covers very different products. Some lower your rate, some lower what you owe, and one wipes debt out in court.
Each costs something different, mostly in your credit.
The four kinds of debt relief
The table puts the four side by side.
| Consolidation loan | Debt management plan | Debt settlement | Bankruptcy | |
|---|---|---|---|---|
| What you repay | All of it | All of it | Less, if creditors agree | Some or none, by court order |
| Rate | The loan’s rate | Lowered by each card | Interest keeps running while you save | Stops |
| Credit | Small dip, then often better | Cards closed for a while | Missed payments, then settled marks | On your report for 10 years |
| Cost | Interest and any fee | Small monthly fee | A share of the debt, plus taxes on what is forgiven | Court and attorney fees |
Debt relief loans
A debt relief loan is a debt consolidation loan: one new loan pays off the cards. You repay everything, at a lower rate if your offer beats your cards. Compare lenders on the best loans page.
It is the only kind that does not depend on falling behind first.
The best debt relief programs, by who they fit
Behind on nothing, with fair or good credit: a loan. Turned down for a loan: a debt management plan with a nonprofit counselor.
Already months behind with no way to pay in full: settlement may cut the balance, at a heavy credit cost. See loan vs debt settlement.
Owing far more than you can ever repay: talk to a bankruptcy attorney. Bankruptcy stays on your report for 10 years (FTC).
Credit card debt relief program warning signs
Only scammers ask for payment before they settle any debt (FTC). Promises of a set result are another warning sign.
Walk away from anyone who tells you to stop talking to your card companies.
Taxes on forgiven debt
Debt a card company forgives can count as taxable income. The IRS explains the rules and exceptions in Topic 431.
Related topics
- Credit card consolidation loan
- Discover
- Student loans with other debt
- Debt consolidation loan calculator
Before you borrow
What is the best debt relief program?
The one that fits where you stand: a loan if you are current with fair credit, a nonprofit plan if a loan is out of reach.
Are debt relief loans legit?
A debt relief loan is a regular consolidation loan. Check the APR, the fee and the lender’s license.
Does debt relief hurt your credit?
A loan barely does. Settlement and bankruptcy hurt it for years.
Pick the kind of debt relief that fits you
You want the cards gone, and every company says it can help. Start with the one that does not need you to fall behind. Call and a specialist checks if a loan works before anything else.