Debt Relief: Considering Your Options
People who need debt relief often find themselves in so much debt that they are unsure of what to do. While it’s an uncomfortable position, it’s one shared with millions of Americans, and it’s nothing to be ashamed of. Take Steven, for example. He’s in his early thirties, has a decent job in marketing, and has always considered himself financially responsible. But after years of treading water with minimum payments, unexpected medical bills, and an expensive move after a breakup, he found himself sitting at his laptop at 1 a.m., searching “how to get out of debt without declaring bankruptcy.” That late-night rabbit hole led him to Reddit, where he read story after story from people who had been in his shoes, reporting feelings of being overwhelmed, embarrassment, and uncertainty about where to start.
Redditors shared how they’d racked up credit card debt during grad school and were finally able to turn things around after years of struggling, after signing up for a debt management plan. Other users discussed the struggles of trying to DIY their way out of debt, only to realize that consolidating their debt wasn’t as easy as they had thought. The last option seemed more extreme, with users leaping into debt settlement, negotiating their balances down after dealing with months of collection calls to get their debts down to manageable levels. Steven related to all of them in different ways. Each one helped him see that getting help with debt doesn’t make you irresponsible; it means you’re taking it seriously.
Here’s what Steven learned, and what anyone considering debt relief in 2025 should know.
What Is Debt Relief?
Debt relief is a catchall phrase that encompasses multiple strategies aimed at reducing or restructuring what you owe, and there are various types of debt relief companies. The ultimate goal of all debt relief options is to make repayment more manageable and to get out of debt sooner. There’s not a one-size-fits-all debt relief solution. Here are the different types of solutions that fall under the debt relief umbrella:
- Debt Consolidation: Debt consolidation happens when you combine multiple debts into a single loan. The goal can be either a single payment, a lower interest rate, or both.
- Debt Management Plans: Debt management plans involve working with a nonprofit credit counseling agency to negotiate better terms and create a structured repayment plan.
- Debt Settlement: Debt settlement typically means using a third-party service to negotiate with creditors on your behalf. The third party’s objective is to persuade the creditors to agree to a lower payment than the total amount owed. As a user, you will pay a fee to the negotiator after a settlement is agreed upon. You should never be asked to pay for debt settlement up front.
- Bankruptcy: Bankruptcy is a court-ordered process designed to discharge or restructure eligible debts, although it carries long-term credit consequences. Depending on the type of bankruptcy you file, it can be reported on your credit profile for up to 7 to 10 years.
Each of these has pros, cons, and specific eligibility requirements. The best choice depends on your income, total debt, credit score, and personal goals.
What Is Debt Consolidation?
Debt consolidation loans were the first option Steven looked into. At a glance, it seemed simple. All he’d need to do is take out a personal loan with a lower interest rate and use it to pay off high-interest credit cards: one payment, one due date, less interest.
This can work well if:
- You have decent credit (typically 670 or higher).
- Your income can support a new loan.
- Your total debt isn’t wildly out of proportion to your income.
Many lenders now offer online prequalification tools, enabling you to view your potential rates without affecting your credit score. That said, consolidation only works if you stop using your old cards. Otherwise, you’re just layering on more debt.
Steven was fortunate to reflect on this after reading about individuals who consolidated $25,000, felt temporary relief, and then incurred another $10,000 in new debt within a year because their credit lines reopened. That cautionary tale stuck with him.
Debt consolidation can streamline your finances and be an excellent tool for reducing interest rates, but a budgeting plan should always be put in place when you consolidate debt. Some companies, like Achieve, offer a hybrid approach where they consider debt consolidation options available for your credit profile before exploring debt settlement options, helping you make the decision that makes the most sense for your credit situation.
What Are Debt Management Plans?
If your credit score isn’t quite there for a reasonable consolidation loan, a debt management plan (DMP) might be a better fit. These plans are set up by nonprofit credit counseling agencies that work with your creditors on your behalf to lower interest rates on your existing debt. The counseling agency will also work with you to set up a single monthly payment to cover your outstanding debt.
Key things to know:
- You typically pay off your debt in 3 to 5 years.
- Your credit accounts may be closed during the plan.
- There’s usually a small monthly fee, but the interest savings can be substantial.
Those who advocate for debt management programs describe how their counselor helped cut their interest rates from 28% to 8%, making it possible to finally make a dent in their balances finally. For Steven, who was juggling six cards and barely keeping up, that kind of structure sounded like the breathing room he needed.
What Is Debt Settlement?
Debt settlement companies are one of the most aggressive debt relief options. If you opt for settlement, you must stop making payments to your creditors and instead start depositing the money that would have gone towards your expenses into a dedicated savings account. Once there’s enough in the savings accounts, a settlement company will use that savings to negotiate with your creditors to accept a lump sum, often 40 to 60% of the balance.
Risks include:
- Your credit score will drop.
- Creditors might sue.
- There’s no guarantee they’ll agree to settle.
That said, if you’re already behind and facing months of minimum payments that aren’t making a dent, it could be a path forward. Some might describe debt settlement as a “controlled crash landing.” Those who seek out debt settlement often start to ignore their debts entirely as they begin to feel powerless to pay down their balances. It’s not uncommon to be ignoring phone calls or mail at this point, terrified of what the messages contain. Debt settlement isn’t a perfect process, but for some individuals, it can be a path to a fresh start.
How to Move Forward
If you’re like Steven and not sure where to begin, here’s a step-by-step breakdown:
- Gather the Facts
List all your debts. This includes taking note of your balances, interest rates, and monthly payments. Knowing your total financial picture is crucial. - Check Your Credit Score
This helps you determine if debt consolidation might be an option or if a DMP is more realistic. - Research Your Options
Look into nonprofit credit counseling. They’ll help you compare all strategies without pressuring you. - Avoid Scams
Be cautious of companies that demand hefty upfront fees or guarantee results. Legit services are usually certified by the NFCC or FCAA. - Create a Budget
Whatever path you choose, you’ll need to build a budget that supports your new plan.
Compare Debt Relief Options
Final Thoughts
Debt relief isn’t about failure. It’s about facing things head-on and choosing a strategy that gets you back on track. For Steven, starting the debt relief process meant having difficult conversations with himself, conducting thorough research, and ultimately creating a plan to confront his debt head-on.
Whether you’re just starting your debt relief research or seriously considering a debt relief solution, know this: you’re not alone, and it’s not too late to change the story.
Watch Now: Understanding Your Debt Relief Options in 2025
Frequently Asked Questions
Find answers to common questions about debt relief.
Whether or not debt relief hurts your credit score depends on the option you choose. Debt consolidation is unlikely to negatively impact your credit score as long as you don’t take on new debt after a consolidation. Debt management plans will typically require you to close credit accounts, which can affect your score initially. Debt settlement and bankruptcy have the most significant negative impact, but they can still be a path to rebuilding over time.
Debt consolidation involves obtaining a personal loan to combine multiple existing debts into a single new loan with a lower interest rate. You still repay the full amount you owe, and will generally need good credit to be approved for a loan large enough to cover your debts. Debt settlement involves negotiating with creditors to pay less than what you owe, which may result in a faster payoff but with a larger impact on your credit.
Typically, you cannot use your credit cards while using a debt management plan (DMP). Most DMPs require you to stop using your credit cards and may even involve closing those accounts. The goal is to help you pay off existing debt in a structured and disciplined manner.
Many debt relief programs are legitimate, but some aren’t. Look for programs affiliated with reputable organizations, such as the NFCC (National Foundation for Credit Counseling) or the FCAA (Financial Counseling Association of America). Be cautious of companies that ask for hefty upfront fees or make promises that sound too good to be true.
