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What are Debt Relief Programs?

Dena Standley | April 23, 2024

Dena Standley
Legal Expert, Paralegal
Dena Standley, BA

Dena Standley is a seasoned paralegal with more than 20 years of experience in legal research and writing, having received a certification as a Legal Assistant/Paralegal from Southern Technical College.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Debt relief programs help consumers manage overwhelming debt situations. These programs assist consumers in making a better plan for keeping up with their payments. SoloSuit offers debt settlement through SoloSettle to help consumers negotiate with creditors and debt collectors to resolve their debts.

Debt relief programs help consumers manage and pay off debt. Such programs entail reorganizing debt to make it easier to pay within the shortest time possible. Getting into a debt relief program means you hire a debt relief company to help you implement one or more strategies to get your debt situation under control. The program can help you:

  • Reduce the overall amount you owe
  • Lower the interest rates on outstanding debt
  • Extend the payment period
  • Secure better terms

Creditors often consider accepting the debt relief option presented by defaulting borrowers because they would rather get a reasonable percentage of their money than lose it all. Debt relief programs are open to individuals, small businesses, municipalities, and even large corporations. This article examines various debt relief programs, their pros and cons, and who qualifies for one.

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What are the best debt relief programs?

The best debt relief programs first assess your debt situation and suggest the best approach to managing your debt. They will consider the amount of debt you owe, your overall credit, the interest rate on the existing accounts, and your ability to keep up with the new payment plan. These factors determine which debt relief program is best for you. Let's discuss three options you can consider.

Debt consolidation

In debt consolidations, the relief company you choose to work with will help you combine multiple debts into a single debt under a new account. The money you receive from a consolidation loan pays off your existing account balances. Ultimately, you are left with one debt to make monthly payments instead of multiple payments with different accounts and interest rates.

Another option is consolidating multiple debts using a balance transfer card. This often works if your debts mainly consist of credit card bills. The advantage of balance transfer credit cards is that they offer an introductory Annual Percentage Rate (APR) of 0%. However, you must clear the debt within the set period, or you may incur an even higher interest rate than your previous debt.

You should use caution when considering this method. Too often, you may find yourself using the credit cards you paid off by transferring a balance, creating a vicious cycle of increasing debt.

Debt settlement

Unlike debt consolidation, where the debt amount you owe may not change, debt settlement aims to lower the debt to a significantly smaller amount, enabling you to make a one-time lump sum payment or reorganize into fewer shorter-term payments. The debt relief company you hire to work with will approach your creditor and ask for a new debt amount with the promise of paying it rather than receiving nothing because the borrower cannot pay the entire amount.

Another option is to use SoloSettle. This tool allows you to stay in control of the negotiation process while still having the watchful eye of a debt specialist monitoring the entire process. Basically, it’s a tech-driven approach to debt settlement and can help you start the settlement negotiation conversation. Sometimes starting the conversation is the hardest part.

Watch this video to learn more about how to settle your debt:

Credit counseling

In credit counseling, you employ the services of a free or paid credit counselor who helps you create a budget and educates you on how to manage your money and debt. The first step a credit counselor will take is to review your finances and then work with you to devise a personalized plan. This approach will help you keep up with payments and overcome other financial challenges. Nonprofit organizations offer most credit counseling services at minimal to no cost.

Other specialized credit counselors help you develop a debt management plan and enroll you in their program. Here, you will make payments to an account you can access, but the organization pays the debt to your creditors based on the payment schedule you created together. Some credit counselors can negotiate a lower interest rate or fee waivers but rarely the overall debt amount. Note that you may be required to commit not to apply for a new line of credit while still on the program.

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What are the pros and cons of debt relief programs?

Debt relief programs are diverse, and the pros and cons you experience depend on the program you decide to use. Debt relief programs often sound too good to be true. If you wonder, “What are the cons of debt relief programs,” the following table should help.

Debt Relief Pros and Cons
Pros Cons
Consolidation Simplified payments
Lower interest rates		 Debt isn't reduced
May involve origination fees or other charges
Settlement Reduced overall debt
Professional assistance		 May not reach a settlement
Credit score is affected
Credit Counseling Often free
Structured plan to pay off debt		 You must keep the plan on track
Limited new credit line options

The above table gives an abbreviated look at the pros and cons of different types of programs. Weigh each against your situation to decide which is right for you.

What kind of hardships are needed to qualify for debt relief programs?

Not everyone qualifies for some debt relief programs. For example, to get an excellent debt settlement offer, you must prove to the creditor you have serious financial hardship. To be accepted to some nonprofit offering free credit counseling services, you must meet certain hardship criteria. The following are the most common hardship situations that can get you into a debt relief program:

  • Job loss or income reduction
  • Medical emergencies
  • Financially difficult divorce or separation
  • Natural disasters
  • Unexpected catastrophic event

SoloSuit invites all consumers to use our various tools to get out of debt. Our unique approach lets you stay in charge of the process from start to finish. You have the flexibility to negotiate the best settlement deal for you. Start working on your settlement letter with SoloSettle today.

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