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4 Debt Relief Options that Actually Work

Updated: August 8, 2022

Debt — especially credit card debt — is easy to get into, but really tough to climb out of. Instead of making minimum payments for the rest of your life — which, in most cases, barely chip away at balances — claim your financial freedom with the following best debt relief options.

The average total personal debt (2018) is $90,4601

In this article:

United States Debt Statistics

  • 2020 Q1 American consumer debt (not including mortgages): $4.2 trillion2
  • Number of Americans that have debts in collections: 77 million3
  • Average credit card debt per household in 2021: $87014
  • The average number of cards per credit card holder: 45

Debt Consolidation Loan

Have a collection of overused credit cards or other high-interest debts? Getting a debt consolidation loan allows you to pay off credit cards and other balances and roll all of your debt into a single loan — typically with significantly lower interest.

Consolidation loans are personal loans usually offered by lending and financial institutions. Instead of revolving credit, they’re installment loans, which means they work like a car payment. You’re given an estimated payoff date, and if you pay down your balance, it doesn’t free up spending power like that of a credit card.

Pros of Debt Consolidation

  • Bundling your debt into a single payment can reduce the chance of missed/late payments
  • Typically, debt consolidation programs offer lower interest rates than credit cards
  • There may be an immediate boost to your credit score after cards are paid off

Cons of Debt Consolidation

  • In some cases, the interest rate could be higher than credit card interest
  • Approval usually requires a high credit score
  • Fees and other fine-print particulars could zero out savings

*It should be noted that if you roll the balance of your cards into a debt consolidation loan, you may not want to close your credit card accounts. Sometimes, closing long-standing accounts can negatively impact your credit score. However, if the temptation to rack up debt is too severe, it may be in your best interest to shut them down for good.

Debt Settlement Agreement

A debt settlement agreement is a plan entered into by debtors and creditors that works to significantly lower or wipe out a debt. Settlement agreements can work in a range of ways.

You can either negotiate a debt settlement by yourself with a debt settlement offer letter or by hiring a lawyer or debt settlement company. Experience can make a difference, but if you’re confident in your negotiation abilities, it may be better to save the money you’d pay to professionals and DIY your debt settlement plan.

The point of a debt settlement agreement is to negotiate a payment amount lower than the amount you owe. Oftentimes, the best use case for debt settlement agreements is when debts are turned over to collection agencies and the debtor has a lump sum payment to offer. Payments offers are usually 40-70% of the debt owed — so if you owe a debt of $600, you might offer a payment of $350. In other cases, you can work directly with your creditor or collection agency to negotiate a settlement agreement that’s broken up into payments. If you’re experiencing a hardship, it’s important to explain your circumstance and back it up with evidence.

Not all credit card companies or collection agencies will accept debt settlements, and some do on a case-by-case basis. Here are a few ways you can try to settle a debt:

  • Negotiate your interest rate so that your credit card payments are more affordable 
  • Save up and offer a lump-sum payment that is lower — sometimes much lower — than the total amount you owe. There could be some back and forth negotiation with creditors, and not all creditors will accept a settlement.

Balance Transfer (With 0% Introductory APR)

A balance transfer works like this: roll the balance from each of your credit cards into a new card that offers an introductory 0% APR (usually for 12 months). When you’re stuck with high-interest credit cards, rolling your cards over to a card with no interest can help you pay down balances quicker.

Though it’s still revolving credit, a balance transfer may equip you with a lesser evil — depending on your situation. If you’re disciplined, you may be able to chip down at your debt much faster, since interest won’t eat away at your payments — for a limited time.

But here’s the catch: balance transfers usually carry a stiff 3-4% balance transfer fee. If the balance transfer fee wipes out savings on interest, a balance transfer may not be your best option.

Debt Management Plan

Instead of trying to tackle debt by yourself, you can speak to a credit counseling company that specializes in creating individual plans that help get you out of revolving debt quickly.

A credit counseling company — most of which are non-profits — offer the following services:

  • Speak to your creditors and re-negotiate your rates for unsecured loans
  • Make your payments
  • Help you learn better financial habits
  • Review your budget and debt goals
  • Create a timeline for getting out of debt

When you’re assigned a credit counselor, you’ll make a single payment to your debt manager, which will be allocated towards your debts. There are fees associated with using the service, but it’s designed to save you money — so the charges should never add to your overall debt.

Watch this for More Debt Relief Solutions!


  1. https://www.experian.com/blogs/ask-experian/research/consumer-debt-study/
  2. https://www.federalreserve.gov/releases/g19/HIST/cc_hist_mt_levels.html
  3. https://www.washingtonpost.com/news/wonk/wp/2014/07/29/a-third-of-consumers-had-debts-in-collections-last-year/?arc404=true
  4. https://www.mycreditsummit.com/credit-card-debt-statistics
  5. https://www.debt.org/faqs/americans-in-debt/#:~:text=Consider%20these%20statistics%20about%20personal,debt%20is%20at%20%2413.86%20trillion.