The past few years have been tough for a lot of people. Between Covid, rising inflation, and high-interest rates, many people are struggling to make ends meet and keep their finances on track. Millions have actually fallen into debt.

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If you find yourself over your head in debt and unable to pay it down, then debt relief may be your best bet. Debt relief plans are designed to make your payments more manageable so that you can become debt-free. But it is not a quick fix. It’s a long-term plan and it can take several years to get your finances under control.

What is Debt Relief?

Debt relief is a broad term that encompasses various strategies and programs designed to help your payments be more affordable so you can become debt-free. It may include a loan that lowers your interest rate, new repayment terms, or even a settlement that reduces how much you owe.

It’s important to understand that debt relief is not a magic wand that makes your debts disappear overnight. Instead, it aims to provide you with a manageable and structured way to pay off what you owe.

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Types of Debt Relief

There are multiple forms of debt relief. The best one for you depends on your interest rates, existing accounts, and overall credit.

Debt Consolidation: This involves combining multiple debts into a single, more manageable loan with a lower interest rate. It simplifies your finances so you only have to make one payment each month.

Credit Counseling: Credit counseling agencies are typically nonprofit organizations that can help you budget, manage your debt, and develop a repayment plan. A credit counselor will come up with a personalized plan for your specific situation.

Debt Management Plans (DMPs): DMPs are typically arranged through credit counseling agencies who create a structured repayment plan for you. When you enroll in a DMP you make a single monthly payment to the credit counseling agency who then uses it to pay off your debt. The total amount owed won’t change, but your credit counselor may be able to negotiate lower interest rates or waive fees.

Debt Settlement: Debt settlement programs negotiate with creditors and debt collectors to reduce the total amount of debt you owe. You make lump-sum payments to settle your debts. There is no guarantee that this will work.

Debt Forgiveness: This is where the lender discharges part of all of your debt. You can ask for debt forgiveness through a debt settlement company or try to negotiate with your creditors yourself.

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What to Know Before You Start

Debt relief can appear to be a very attractive option if you’re having difficulty paying off high-interest debt. Before you decide to pursue it, there are several crucial factors to consider:


Most debt relief programs come with fees, and it’s vital to understand the cost implications. For a debt settlement plan, the fee is typically 15% to 25% of your total debt. If you go with a credit counseling agency, many of the services are free but if you set up a debt management plan they will usually charge a set-up and then a monthly fee.


If you’re considering a debt consolidation loan it is vital to compare interest rates to make sure that you will pay less. Avoid loans that lower your monthly payments but increase the length of time you’re paying them. You’ll likely end up paying more interest overall. If you get a loan with a promotional 0% APR, it’s very important that you pay off your entire balance before the promotional period ends or else you may end up paying higher interest than your original debt.


Unfortunately, the debt relief industry has its share of scams. Be cautious and research any company or program thoroughly before enrolling. Check for complaints with the Better Business Bureau and read reviews from previous clients. If a company promises to settle debts for a fraction of what you owe, demands up front payments, or refuses to send free information about its services, then steer clear.

Program Length

Debt relief programs have varying lengths but they generally take years to complete. Be prepared for the commitment required.

How Does Debt Relief Affect Your Credit?

Debt relief can have both positive and negative effects on your credit score depending on which option you choose. If you go with a debt settlement plan, you are probably already several months behind on payments and most of the damage to your credit score has already been done. A debt management plan will have minimal negative impact on your credit and can even help raise your score if the credit counseling agency reports your on time payments to the credit bureaus and you successfully reduce your debt. No matter which debt relief option you choose, it’s important to monitor your credit report and score regularly to detect any changes or find any errors that could impact your score.

The Bottom Line

If your debt is overwhelming and has become unmanageable then debt relief can help you find a way out, start a new debt-free life, and avoid bankruptcy. Just be sure that you understand the full implications of debt relief – fees, interest, credit score – before you apply. Then once you’re debt-free, it’s time to budget and build that emergency fund so that you don’t find yourself back where you started.

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About the author

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.