Latest news with #debt relief
CBS News
21-07-2025
- Business
- CBS News
Want to enroll in debt management? You'll need to meet these 3 requirements first.
Americans are carrying record levels of credit card debt right now, with the average cardholder owing about $8,000 in total. While carrying this type of debt is never ideal, especially at today's elevated rates, the recent uptick in credit card debt makes quite a bit of sense. Sticky inflation has caused the prices of essentials to skyrocket, and because budgets aren't stretching nearly as far as they should, it has become common for cash-strapped Americans to rely on their credit cards to get by. And, as the credit card debt issues compound, more people are searching for solutions to getting rid of what they owe, ideally without wrecking their credit. There are a few ways to do that, but debt management, in particular, may be worth considering. Unlike other types of debt relief, debt management doesn't require you to borrow more money or default on what you owe. Rather, the goal is to help you pay off your debt by streamlining the payment process and working with your creditors to lower your interest rates and fees. But while debt management programs have helped millions of Americans get rid of their debt, they aren't the universal solution that some assume them to be. These programs are designed for people in particular financial circumstances, and that means there are qualification requirements that determine whether you're a good fit. What exactly are the eligibility rules, though? Find out what debt relief strategies are available to you today. While program requirements can vary, in general, you'll need to meet the following to take advantage of what debt management can offer: The foundation of any successful debt management plan is your ability to make consistent monthly payments. The credit counseling agency you work with on this type of plan will need to see that you have a reliable income source that can cover both your essential living expenses and your proposed debt management payment. During the initial consultation, the credit counselor will review your income from all sources, whether that's employment, Social Security, disability benefits or other regular payments. They're not just looking at the total amount, though. They want to see stability and predictability. For example, someone with a steady $3,000 monthly income might be a better candidate than someone earning $4,000 but with highly variable or seasonal work. The credit counselor will also calculate your debt-to-income ratio and determine whether you'll have enough left over after essential expenses to make meaningful progress on your debts. If your proposed payment would be so small that it would take decades to pay off your balances, they might recommend exploring other debt relief options instead. Explore your options for getting rid of your high-rate debt now. Debt management plans are specifically designed for unsecured debts like credit cards, personal loans and medical bills. You generally can't include secured debts like mortgages, car loans or student loans. Many agencies also have both minimum and maximum debt limits for enrollment. The minimum threshold varies from one program to the next, but it ensures that debt management makes financial sense for both you and the agency. For very small debt amounts, the monthly fees might outweigh the benefits. On the other hand, if you owe more than $50,000 to $100,000 in unsecured debt (limits vary by agency), you might need to explore alternatives like debt forgiveness or bankruptcy. The outcomes also tend to be better for clients who have multiple creditors. The goal is to roll multiple monthly debt obligations into one payment while lowering your fees and interest charges, so if you only owe money on one credit card, you might get the same results without the monthly fees by working with the card issuer directly instead. Perhaps the most challenging requirement is the commitment aspect. Enrolling in debt management isn't just about making the required monthly payments. It requires you to make fundamental changes to your financial habits and lifestyle, too. For example, most programs require you to close the credit accounts included in your plan, which means that you can't continue to use those cards while you're paying them off. Many agencies also ask you to avoid taking on any new debt during the program, at least without their approval. This can feel restrictive, especially if you're used to relying on credit for emergencies or unexpected expenses. You'll also need to commit to the financial counseling and education components. Most reputable agencies require participants to complete budgeting workshops or check in regularly with counselors to track their progress and address any challenges that arise. Debt management can be a powerful tool for the right person, but if you don't meet the criteria, don't lose hope. Consider working on building a stable income, paying down some debt independently or exploring other debt relief options. The most important thing isn't qualifying for debt management. It's finding a solution that matches your specific financial situation that sets you up for long-term success.
CBS News
11-07-2025
- Business
- CBS News
4 debt relief options you can qualify for with a low income
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. You can still pursue debt relief with a limited income, but certain strategies may work better than others. Getty Images When you're living on a low income, even a small credit card balance or unexpected medical bill can feel like a financial emergency. Owing money when you can barely cover rent and groceries is incredibly stressful, and as the interest charges pile up and the late fees kick in, that debt can feel impossible to manage. But in today's high-rate, inflationary environment, this situation is not uncommon. Lots of people have fallen behind on their debt payments and are now looking for a way out. Unfortunately, the path forward isn't always obvious, especially when debt collectors are calling as the bills keep piling up. But the good news is that there are debt relief options that can help, some of which are designed specifically for people in tight financial situations. These programs and strategies can reduce, restructure or even eliminate a portion of what you owe, making it possible to regain control of your finances, all without needing a high income. If you want to take advantage of what these programs can offer, though, you'll need to know which options you might qualify for and how to access them. So, what are the debt relief strategies worth considering when your income is limited? Below, we'll detail four worth knowing now. Find out how to start the debt relief process online today. 4 debt relief options you can qualify for with a low income Here's a closer look at several unsecured debt relief options you may qualify for if money is already stretched thin. Credit counseling and debt management Best for: Those who are still current on bills or only slightly behind but struggling to keep up with high interest rates. Many credit counseling agencies provide free or low-cost services that can help you better navigate your debt. When you take advantage of this option, a certified credit counselor will review your financial situation and may help you create a personalized debt management plan that provides a structured route for getting out of debt. One of the main benefits of a debt management plan is that it allows the credit counseling agency to work with creditors on your behalf to secure reduced interest rates and waived fees. While that won't lower the total balance you owe, it can make the debt more manageable on a limited income. And, the nominal fees that are charged for these services may be easier to fit into your budget than the fees that come with other options. Compare your debt relief options and find the right solution now. Credit card debt forgiveness Best for: Those who have already fallen behind on payments and have access to some funds (or can save them up) to settle debts. Pursuing debt forgiveness involves working with a debt relief company (or on your own) to negotiate lower lump-sum settlements with your creditors. If successful, the remainder of what you owe is "forgiven," allowing you to get rid of your debt without paying the full balance owed. This option can reduce your balances by an average of 30% to 50% (provided that your creditors agree to settle). However, it's not without tradeoffs. You'll need to either have enough money on hand to offer lump-sum settlements or have enough in your budget to save up for them. And, the debt forgiveness process can hurt your credit score. Creditors aren't obligated to accept an offer, either, and you may face taxes on any forgiven debt. But if you can reduce your debt substantially, the tradeoffs may be worth it, especially if your income is limited. Credit card hardship programs Best for: Those experiencing short-term financial hardship but want to keep accounts current. Many credit card companies and lenders offer hardship programs for borrowers who are facing legitimate financial challenges. These programs can be beneficial when your income is limited because they can result in temporarily lower interest rates, waived late fees or paused payments. To explore this option, you'll need to contact your creditors directly and explain your situation. Not all lenders will agree to these arrangements, but it's often worth asking, especially if you're trying to avoid falling deeper into delinquency and can provide proof of the hardship you're facing. Chapter 7 or Chapter 13 bankruptcy Best for: Those with more debt than they can reasonably repay, especially if they're being sued or face aggressive collections. Bankruptcy can sound like a drastic approach, and, given the serious repercussions of filing, it can be. But for some people, filing for either Chapter 7 or Chapter 13 bankruptcy is also the most effective way to eliminate overwhelming debt. Both options come with credit impacts, but they also provide legal protections from collections, lawsuits and wage garnishment. Chapter 7 bankruptcy is designed for those with low income and minimal assets, and if you qualify, most unsecured debts, like credit card balances, medical bills and personal loans, can be discharged completely. Chapter 13 may be an option if you have a steady income and want to reorganize your debt into a three-to-five-year repayment plan. The bottom line If you're living on a low income and struggling to manage your unsecured debt, it's important to know that you're not stuck. From credit counseling and hardship programs to debt settlement and bankruptcy, there are proven ways to lighten your financial load. Each option differs, though, in terms of the relief it can provide and the potential downsides you could face, so take time to consider which one fits your situation. Don't wait too long to act, though. The sooner you get started, the faster you can start building a path toward financial stability.
Yahoo
11-07-2025
- Business
- Yahoo
These are the best debt relief options — which is right for you?
While debt relief solutions may be helpful when organizing and paying down debt, they can easily result in long-term damage to your finances or credit. Common forms include debt settlement, debt management, debt consolidation and bankruptcy. To decide which debt relief option is best, evaluate how each will impact your credit score and long-term financial health. Credit counseling can help you choose. Debt relief is the process of reorganizing your debts to make repayment more streamlined, simple or affordable. You can explore different debt relief options depending on your level of debt and goals. Credit counseling can help you decide what approach fits best. For example, debt management helps you approach existing debts more strategically. Consolidation doesn't eliminate debt but may lower your monthly payment. Debt settlement and bankruptcy may eliminate or reduce your debts but will also damage your credit score. You have four main types of debt relief: debt management, debt settlement, debt consolidation and bankruptcy. The first three all help you pay off the debt. Bankruptcy is the most extreme and can hurt your credit score in the long run, but it could help you discharge debt that you have no way to manage otherwise. There are also debt relief companies that can help you pursue different debt relief options — for a fee. Debt management involves using financial tools and planning to help lower — and eventually eliminate — your current debt. You can go through a credit counseling agency, or you can set up a management plan on your own. Self-led debt management: Creating a debt payoff plan for yourself often involves using repayment methods like the avalanche or snowball approach. This may be a good relief option for those with a handle on their spending habits and are confident in negotiating with creditors. Credit counseling: Credit counseling is a low-cost option offered by nonprofit organizations or agencies. You'll be partnered with a credit counselor who will review your finances to help you find debt relief solutions. For example, a counselor may advise starting a debt management plan (DMP). Learn more: How to pick which debt to payoff first A DMP is a three-to-five-year plan designed to help you exit debt sooner. You will make a monthly payment to the agency, which will pay your creditors. If you want a plan that looks at your entire financial profile and all of your existing expenses, you may want to consider setting up a debt management plan. Michael Sullivan, a personal finance consultant with Take Charge America, says, 'When a consumer has significant debt and can afford to pay it off, albeit with some help, debt management is the best solution (and usually the place to start).' Debt settlement involves working with a third-party settlement company to resolve your unpaid debts. They will negotiate on your behalf with creditors in hopes of getting portions of your debt forgiven. Once you're approved for settlement, the company you've selected will help you handle the repayment process. You'll be responsible for depositing a monthly payment into an account the debt settlement company sets up. The process typically takes between 12 and 48 months. These companies charge a percentage of your settled debts as a fee — typically between 15 percent and 25 percent. This approach comes with big drawbacks. The debt settlement company will tell you to stop paying your creditors to give it negotiation leverage, which will massively reduce your credit score. Creditors are also under no legal obligation to work with settlement companies. If the debt settlement fails, you will be left with the same debt and a worse credit score. When there are no other options available and you don't wish to turn to bankruptcy, settling your debts may be the best — and only — option for taking care of overwhelming balances. Debt consolidation combines multiple debts under a new personal loan or credit card to streamline repayment. Consolidating makes the most sense if you qualify for a lower rate than what you had on one or more of your previous debts. Another debt consolidation pro-tip: It can make the repayment process easier. You'll only have to make one monthly payment instead of multiple. In the case of a debt consolidation loan, that monthly payment will be fixed. But keep in mind that it will include added interest. Learn more: Bankrate's debt consolidation calculator If you have multiple high-interest debts and good credit scores or a cosigner who can help you qualify for a better interest rate or terms, consolidating could be a smart financial move. Start by prequalifying with multiple lenders. Prequalification lets you see your predicted interest rates and eligibility odds before applying, so your credit isn't impacted. 'Debt consolidation may be the best option for a consumer who falls into debt due to an illness or accident but has good money management skills,' Sullivan says. 'Some consumers who do not qualify for a debt management plan because a budget analysis indicates they don't need it might benefit from the reduced costs of a consolidation loan.' Look for a lender that meets your needs and offers lower rates than your existing loans. However, only apply or accept the loan if you're certain you can comfortably make the monthly payments for the entire term. 'Consumers who have spending issues often get in more trouble if they create new credit and should avoid consolidation,' adds Sullivan. Bankruptcy is the legal process of disputing outstanding debts or financial obligations. Once approved by a judge and court-appointed trustees, you can either qualify for Chapter 13 or Chapter 7 bankruptcy. Unlike with settlement, creditors legally can't take action against you until the process is over. Bankruptcy offers a fresh start to those with unmanageable delinquent debts — but it comes with some major risks. Your assets are measured during the process and may be seized to satisfy your delinquent debt. What's more, bankruptcy stays on your credit report for up to 10 years. It significantly reduces your credit score and makes it harder to get approved for other loans or financial opportunities in the future. Declaring bankruptcy should be a last resort due to the potential costs and the long-term financial consequences. Declaring bankruptcy may be the best solution if all the following are true: You have large amounts of unpayable debt You are already at risk of losing essential assets — such as your car or home You don't qualify for other forms of relief We recommend consulting a bankruptcy attorney before starting this process Natalia Brown, chief compliance and consumer affairs officer at National Debt Relief, adds, 'Bankruptcy is something to consider when your debt has gotten to the point where you can't afford basic things like rent, food, or bills, and none of the other options, like debt settlement or debt consolidation, are working for you.' Learn more: Rebuilding credit after bankruptcy There isn't one single best debt relief option. What's best for you ultimately depends on your debt burden and how long you've been unable to repay your balances. However, the most efficient method of paying down your debt while having the smallest impact on your credit is likely the best option for you. Just remember that most debt relief options aren't immediate and will need to fit your long-term financial goals. Explore all the relief methods and consider the full impact of each before making a final decision. Research companies' reputations and beware of potential scams on the market as you pursue a path to relief. To avoid scams, Brown says, 'A big red flag is if a company contacts you first, as legitimate debt relief companies will not cold call.' Debt reduction and credit repair also take time. 'It's easy to fall for pressure to decide quickly, but make sure to avoid companies that won't clearly explain costs, timelines or credit impacts,' Brown adds. To manage and pay off your debt, you can choose from debt settlement, management or consolidation. Each option has its own benefits and drawbacks to consider before starting along a path. Settlement and bankruptcy should be saved as last resorts, as they can damage your credit for an extended period. Is debt relief a scam? There are plenty of reputable companies that can help you pay off your debt or reduce how much you owe. But you must keep an eye out for scams. Red flags include guaranteeing debt elimination, saying your credit score will improve or demanding fees upfront. What are alternatives to debt relief? You can find several alternatives to debt relief. For instance, while not ideal because of the risks of losing your home and adding more debt, home equity products could mean lower monthly payments. Can you DIY debt relief? Yes, it's possible with a good plan and financial discipline if your debt is not too high. You might work on adjusting your budget on your own, such as putting your savings into paying down debt. You can also try negotiating a payment plan with your creditors. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
