In a broad sense, debt relief is any solution that facilitates debt repayment, making it easier, cost-wiser, and faster. However, each one of these solutions may have its own tradeoff. That is, some suggest paying back a full sum to keep good credit, others offer a fast way out of your debt trouble, which negatively affects your credit.

To help you make the right decision, today, we collected the most popular credit relief options for you to choose when thinking your way out of debt. Consider each one carefully, especially if you want to keep a good credit rating.

Types of Debt Relief Programs   

In general, there are two broad types of debt relief programs you should consider when improving your credit report. Indeed, there are plenty of professional service providers who can help you get out of a complicated debt situation. For those who can’t fix their credit situation single-handedly, there’s a choice between debt consolidation programs and debt settlement programs.

Let’s see what each of these programs can offer.

Debt Consolidation Programs

In a nutshell, consolidation programs suggest paying off a full amount of debt, so your credit won’t longer be affected. The same as for DIY consolidation programs, here, the goal is to free you from debt entirely. Specifically, it is done by reducing or eliminating interest and fees, which allows you to close your debt faster. And since you repay the principal in this case, this positively influences your credit.

Usually, debt consolidation programs vary not only by their name but also by the type of debt they help to close. However, the downside of these programs is that they cost you more than you have to pay to consolidate your debt. Here, the point is that you pay interest charges, besides the principal. Since there are more charges, these programs take much more time than ordinary settlements.

Debt Settlement Programs

The primary goal of any debt settlement program is to help you close the debt quickly by paying as little as possible. In this case, a partially repaid debt is considered closed, meaning that you may pay the principal in part to get out of your debt. Debt settlement programs usually don’t require paying fees, so if you are looking for a cost-wise debt relief program, you should pay attention to debt settlement ones. In addition, debt settlement may sometimes imply negotiation where you can strike the most affordable deal.

Indeed, debt settlement programs provide you with the means for a quick exit from your debt situation. However, there’s a fly in the ointment; paying only a part of what you own negatively affects your credit. That is, each “partial payoff” leaves a “dark spot” in your credit report that remains there for seven years. With the credit score damaged in that way, it will be harder for you to further apply for loans and credit cards. In these circumstances, you will still be able to get financing, but at higher rates and non-flexible terms, which will last until you recover your credit.

Alternative Debt Relief Options

If you have doubts about whether to ask for professional debt relief services, there are still several options you can consider when closing your debt. At any rate, debt relief can be any solution that allows you to get out of it faster and cheaper — even by doing it yourself. Now, it’s time to consider DIY credit relief options.

Payment Deferment

Under the option, you can temporarily suspend your debt payments. If the lender approves it, you can do it without penalties and any negative effect on your credit report. However, you still have to carry interest charges.

Debt Forbearance

In the case of this option, you ask the lender to reduce or even suspend your monthly debt payments. Usually, forbearance periods last less than deferment periods, but in order to have a chance of forbearance, you should ask the lender about it at the very beginning of your financial difficulties. The point is to anticipate your inability to repay the debt before you actually fall behind the repayment schedule.


Alternatively to debt deferment and forbearance, you can ask the lender to permanently change the loan, for example, by lowering the actual interest rate or monthly payments. However, the new rate makes sense only if you qualify for it; if your credit score is better than when you received the initial financing from the creditor, then there will be no problems.

Loan Modification

This type of debt relief much resembles refinancing as it suggests changing the terms of a loan agreement. But rather than changing the interest rate, the loan modification can affect the amount of the principal or the duration of the loan term. Also, it may allow you to change an adjustable interest rate for a fixed one.

Debt Forgiveness

Debt forgiveness means closing the debt without penalties. No “half measures” are allowed there, meaning that the debt is forgiven without any penalties once you meet the eligibility requirements. Also, there’s tax debt forgiveness, which is only possible if you can legally prove you don’t owe the debt.

Workout Arrangements

Work arrangements apply only for credit cards, meaning that if you can’t afford to handle the current repayment plan, the lender may agree to rearrange it for you. In most cases, the creditor will close or freeze your account. After that, you still need to repay the debt you owe, yet, the credit may agree to “re-age” your account by revising it and removing late payments, which should make for the lesser credit damage.

Voluntary Surrender

According to the voluntary surrender, you give up the property attached to your loan to get out of debt. Most frequently, this option is used for auto loans when you give up a vehicle to close your debt, which is also called “repossession.” However, you still damage your credit in this way as you didn’t meet the original obligation to repay your loan.

Also, you may use voluntary repossession to cover your mortgage — until the property you sell recoups the debt balance. Otherwise, the lender can sue you to collect the rest.


Finally, if none of the earlier options don’t work for you, the only thing you are left to do is to file for bankruptcy. Having done that, you will be provided with relief in the form of discharging most (if not all) of your debt. Most likely, you will have one of the following scenarios: you will either have all your assets liquidated for a quicker clean break or the lender will rearrange your repayment plan so that you can afford to pay at least part of your debt to get discharged.

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