Latest news with #debtforgiveness
CBS News
11 hours ago
- Business
- CBS News
Debt forgiveness vs. debt consolidation: Which one could save you more?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Both debt forgiveness and debt consolidation can be good options, but the savings can differ significantly between these two strategies. Getty Images It can be tough to know what to do when you're staring at a pile of credit card bills and you realize that the minimum monthly payments alone are eating up a large portion of your paycheck. But while this type of issue can be stressful, it's unfortunately not uncommon right now. Between the higher costs of essentials and the elevated interest rate environment, millions of Americans have been forced to turn to their credit cards to make ends meet and are now struggling under the weight of their high-rate credit card debt. As a result, many are searching for ways to lighten their financial load, and while there are lots of options to choose from, two of the most effective routes for those with high credit card balances or multiple high-rate loans are debt forgiveness (also known as debt settlement) and debt consolidation. Each of these options promises relief, but in very different ways — and with vastly different consequences for your wallet and credit score. Debt consolidation, for example, can simplify repayment and lower your interest rate, but it won't reduce your principal balance. Debt forgiveness, on the other hand, can slash the amount you owe, but it often comes with serious credit damage and other trade-offs. But which one could actually save you more? Below, we'll break down the costs, timeline and credit implications of both strategies to help you make the right move for your financial future. Speak to a debt relief expert about the help available to you today. Debt forgiveness vs. debt consolidation: Which one could save you more? Before we look at how much debt forgiveness and debt consolidation could save you, it's important to understand how each of these debt relief options works. Debt consolidation combines multiple debts into one new loan or payment plan. Instead of juggling several credit card payments, you get a single monthly payment, ideally at a lower interest rate. Common consolidation methods include: Debt forgiveness works completely differently. With this type of debt relief, you (or a debt relief company you hire) negotiate with creditors to try and get them to accept less than what you owe in return for a lump-sum payment. When successful, debt settlement typically leads to paying between 30% to 50% less than the original balance owed on the account. Here's how a settlement typically works: You stop making payments to creditors entirely Monthly payments are then made to the debt relief company and deposited into a separate account That money accumulates, and the accumulated funds are used to make lump-sum settlement offers You also have to pay the debt relief company fees, which are generally between 15% to 25% of the enrolled debt The catch: You must stop payments during negotiations, which damages your credit as accounts become delinquent. Find out how to start settling your debt for less. Timeline and credit impact Debt consolidation can happen relatively quickly, often within a few weeks if you qualify for a personal loan or balance transfer credit card. The payoff timeline depends on the terms you choose, but most people opt for loan terms between two and five years. This approach can actually help your credit score over time by lowering your credit utilization ratio and establishing a positive payment history. Debt forgiveness is a much longer process, typically taking two to four years on average to complete. During this time, your credit accounts will likely be charged off as bad debt, and you may face collection calls and potential lawsuits. Your credit score will generally drop significantly and these negative marks will remain on your credit report for seven years. Cost comparison Now let's look at an example of how the savings and costs would compare between your options if you had $25,000 in credit card debt at an average interest rate of 21%. Option 1: Keep paying monthly payments Monthly payment (based on 3% of the balance): starting at $750 per month Time to pay off: 30 years Total interest paid: roughly $34,557 Total paid: about $59,557 Option 2: Debt consolidation with a personal loan at 13% over four years Monthly payment: approximately $671 Interest paid: $7,193 Total paid: about $32,193 Total savings vs. monthly payments: $27,364 Option 3: Debt forgiveness (assuming a 50% reduction and 22% company fees) Amount settled for: $12,500 Settlement company fees: $5,500 Total paid: approximately $18,000 Total savings vs. monthly payments: $41,557 While debt forgiveness saves substantially more money upfront, it's important to understand that the credit damage could cost you thousands more in higher interest rates on future loans, insurance premiums and other financial products. So, the savings from debt forgiveness might disappear, at least in part, if you need to finance a car or home shortly after your debt has been settled. The bottom line While debt forgiveness can help you save substantially compared to debt consolidation, your decision typically shouldn't be based solely on which option saves the most money upfront. If you can qualify for debt consolidation and manage the monthly payments, this approach protects your credit while still providing meaningful savings compared to making just the monthly payments. However, if your debt load is truly unmanageable and you're already facing potential bankruptcy, debt forgiveness might be worth the credit damage to avoid more severe consequences.
Yahoo
5 days ago
- Business
- Yahoo
How can my credit card debt be forgiven?
Credit card debt forgiveness is a way to have some or all of your credit card debt wiped clean without the need to pay it back. It can happen, but it most likely won't in the majority of situations. Still, there are ways to negotiate credit card debt, which could include your lender reducing some of the total debt you owe. Unfortunately, having your credit card debt completely forgiven isn't likely. Credit card companies and lenders let you borrow money, and it's up to you to repay the debt. However, while credit card debt forgiveness is uncommon, there are other ways to receive debt relief. If you're struggling to pay off credit card debt, consider these four credit card debt relief options. A credit card hardship program is a plan that certain credit card issuers offer if you're having trouble paying your credit card bills. The terms and conditions of each program can vary, and not all issuers have these programs, but the general goal is to help you manage your debt, possibly through a payment plan. This could involve providing a way to ease your debt burden in some way, such as waiving late fees, lowering your interest rate, or reducing your minimum monthly payment. Debt settlement is when you or a company working on your behalf negotiates with your creditors to reduce the amount of debt you owe. That sounds like a great deal, but you have to be careful with working with debt settlement or debt relief companies that are scammy or overpromise what they can deliver. Depending on the situation, working with a debt settlement company could leave you in more debt than when you started and hurt your credit. It may be worth trying to negotiate debt settlement yourself with your creditors or working with a nonprofit credit counseling agency to become debt-free. Free or low-fee nonprofit credit counseling organizations can help you make a debt management plan using recommended strategies and practices. Reputable credit counselors aren't out to scam you or charge high up-front fees. Rather, they want to help you become debt-free through personalized plans and education. Filing for Chapter 13 or Chapter 7 bankruptcy could discharge and get rid of unsecured debt, including credit card debt. However, bankruptcy is typically seen as a last resort if you can't repay your debt because it severely impacts your credit for years. A bankruptcy could stay on your credit reports for up to 10 years, and it may drop your credit score by up to 200 points. Consider these three debt repayment methods to help pay off your debt. You can use balance transfer credit cards to help tackle your debt in two ways: Organize your debt: If you have debt spread out between multiple credit cards, you can use a balance transfer card to consolidate credit card debt in one place. This can make it easier to keep track of your debt and work toward paying it off. Avoid interest: The most attractive feature of balance transfer cards is getting 0% APR on your transferred balance for about 12 months or more. Avoiding interest charges can help you focus on paying off your debt. Keep in mind that balance transfer cards only tend to make sense if the amount you save on interest is more than you have to pay in balance transfer fees. This embedded content is not available in your region. Similar to how you can consolidate debt with a balance transfer card, you can also consolidate credit card debt with a personal loan. You can use a loan to pay off existing credit card debt and then focus your surplus income toward paying off the loan. It typically only makes sense to use a debt consolidation loan if it has a lower interest rate than the overall interest rate of your existing debt. For example, a personal loan with a 7% interest rate is better than three credit cards with an average interest rate of 18%. Though you would still need to consider any potential fees associated with a loan. The debt snowball and avalanche methods are two strategies that can help you pay off your debt. Neither method is necessarily better than the other, as it depends on your financial situation and which strategy makes the most sense for you. With both methods, you list out your debts, including interest rates and credit card balances owed. You then start paying off specific debts depending on which method you choose. With the debt snowball method, you work toward paying off the smallest debt first. Once that's paid off, you move on to the next smallest debt. This continues until you've paid off all your debts. With the debt avalanche method, you pay off the debt with the highest interest rate first. Once that's paid off, you move on to the debt with the next highest interest rate. This continues until you've paid off all your debts. The debt snowball method is typically better if you need more motivation because it focuses on paying off small debts quickly and moving on from there. The debt avalanche method will likely save you more money because you pay off high-interest debt first. Whichever method you choose, you can pair these strategies with a credit card debt calculator to see how long it may take you to become debt-free. It's typically not possible to have your credit card debt wiped clean unless your lender decides to forgive your debt, which is uncommon. However, you might be able to negotiate your credit card debt or use a company's financial hardship program. Declaring bankruptcy as a last resort could clear your credit card debt, but it would negatively impact your credit for years to come. Late credit card payments, accounts sent to debt collections agencies, and Chapter 13 bankruptcies can last up to seven years on your credit report, affecting your credit the entire time. Credit card debt settlement typically lowers your credit score because your credit report may show an account with a 'settled' status, which means an account was paid for less than the full amount. This shows potential lenders that you were only able to repay a portion of your debt. Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to the Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank's website for the most current information. This site doesn't include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.
CBS News
6 days ago
- Business
- CBS News
How to qualify for medical debt forgiveness
If you're struggling to pay off your medical bills, debt forgiveness could be an option to pursue. SengMedical debt has become one of the most common and overwhelming forms of debt in the U.S., and for good reason. The rising cost of healthcare has made even the most routine care unaffordable for the average person, and all it takes is a short hospital stay or emergency room visit to end up with medical bills in the thousands or tens of thousands. And, things like high deductibles, surprise billing and out-of-network charges can add up fast, even if you have insurance. But if you don't have insurance at all, the bills can be staggering. What makes medical debt particularly frustrating is that it often feels unavoidable. Unlike a credit card balance or a personal loan, which you might voluntarily take on or use to bridge the gaps in your salary and expenses, medical debt is typically the result of an unexpected illness, accident or necessary treatment. And when you're dealing with a health crisis, figuring out how to pay the bill is usually the last thing on your mind, at least until the debt collectors start calling about your overdue medical bills and it becomes impossible to ignore. That's where medical debt forgiveness can come into play. While full forgiveness isn't guaranteed or always easy to get, there are legitimate ways to reduce or eliminate what you owe. So, if you're hoping to erase some or all of your medical debt, you'll want to know about qualifying for forgiveness — and what to do if that's not an option. Find out how to start the debt relief process today. How to qualify for medical debt forgiveness The first thing to understand is that medical debt forgiveness can take a few different forms. Unlike student loans or tax bills, there's no single federal program that wipes out healthcare-related debt. But there are hospital- and provider-based programs, nonprofit resources and settlement strategies that can lead to partial or full forgiveness. Here's how to approach these options: Start with hospital financial assistance programs. Many nonprofit hospitals are required to offer charity care or income-based relief under the law. So, if your medical debt is tied to a nonprofit hospital and your income falls under a certain threshold you might qualify for full or partial forgiveness. The catch? You usually have to ask. Hospitals don't always publicize these programs, and some require you to apply within a certain timeframe after receiving care. Look into debt settlement as an option. If you don't qualify for assistance through a hospital or charity, negotiating with the billing department or a third-party debt collector can sometimes lead to partial forgiveness. With medical debt, creditors are often more willing to settle for less than the full balance, especially if the debt is old or has been sold to a collection agency. You can negotiate this on your own, or work with a debt relief company that specializes in unsecured debt. Just keep in mind that there may be fees involved, and any settled debt could be taxed as income if the forgiven amount is over $600. Watch your insurance and billing statements carefully. Sometimes what looks like medical debt may actually be the result of incorrect billing or insurance denials. If you see errors, appeal them. Getting a charge corrected or resubmitted to your insurer could make the balance go away entirely and save you the trouble of needing forgiveness in the first place. Chat with a debt relief expert about the options available to you now. What to do if you don't qualify for medical debt forgiveness If you've explored the forgiveness options above and still come up empty, you may still have some options. Taking the steps below, for example, may help you manage your medical debt burden: Set up a payment plan. Most hospitals and clinics will let you pay off your balance in small monthly installments without tacking on much (or any) interest. This isn't medical debt forgiveness, but it can make the debt much easier to handle and prevent it from going to collections. Explore debt settlement more seriously. Settling your debt for less than you owe comes with some downsides, but it can be a realistic way to cut down the balance. So, if you were hesitant to pursue this route due to the tax and fee implications but are out of options, you may want to revisit the possibility of settling your debt. Prioritize the debt correctly. Unlike credit card debt, medical debt generally doesn't accrue interest or late fees in the same way, and newer changes to credit reporting rules mean that paid medical debts no longer appear on your credit report. Use that to your advantage and focus on higher-interest debts first, while staying in communication with the provider to avoid collections. The bottom line Medical debt forgiveness isn't always easy to come by, but it's more accessible than many people realize. From hospital assistance programs to debt settlement, there are real ways to reduce or erase what you owe, especially if you're proactive about asking for help. And even if forgiveness isn't an option, affordable payment plans and strategic debt management can make the load lighter. The most important step is to take action quickly, though, as there's real power in negotiating, asking questions and exploring every available path to relief.
CBS News
03-06-2025
- Business
- CBS News
How to qualify for personal loan debt forgiveness
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. If you want to pursue debt forgiveness for your personal loan debt, it's important to understand how to qualify first. Getty Images Millions of Americans rely on personal loans to get through tough times, whether the money goes to cover medical bills, consolidate credit cards or deal with another type of financial emergency. But when money gets tight, those same loans can become a burden, especially if high interest rates or job loss make it hard to keep up with the payments. In extreme cases, some borrowers may even fall behind or default on what's owed, which can tank credit scores and trigger aggressive collection efforts. It's no surprise, then, that many borrowers who are struggling to keep up with their loan payments start looking for relief, including the possibility of personal loan debt forgiveness. But here's the truth: While there are ways to reduce what you owe, true "forgiveness" isn't as simple or widespread as with student loans or tax debt. Personal loans are unsecured, meaning there's no collateral, which makes lenders less likely to forgive balances outright. That said, there are legitimate programs and strategies that can reduce or eliminate some of your debt under the right circumstances. If you're feeling overwhelmed by your personal loan debt and hoping to find a way out, here's what you should know about qualifying for forgiveness — and what steps to take if you're not eligible. Find out how to get help with your debt problems today. How to qualify for personal loan debt forgiveness If you're buried in personal loan debt and struggling to keep up with payments, debt settlement (which is also referred to as debt forgiveness) might offer a real path forward. It's not exactly forgiveness in the traditional sense — your lender isn't wiping your slate clean for nothing — but it can reduce your total balance, sometimes by a significant amount. In a successful settlement, your lender agrees to accept less than what you owe, usually in exchange for a lump-sum payment. Here's what it takes to qualify: You need to be behind on payments — or close to it. Lenders rarely consider settling a loan that's still in good standing. If you're current or only recently delinquent, they expect you to keep paying in full. Settlement becomes more realistic once your loan is several months past due and the lender starts seeing your debt as a potential loss. That's when they might be more open to cutting a deal to recover something rather than risk getting nothing. Chat with a debt relief expert about your options now. Financial hardship is key. To make your case, you'll need to show that you're genuinely unable to repay the full amount. This might include a job loss, medical emergency, divorce or another serious life disruption. Be prepared to provide documentation, like income statements, medical bills or unemployment records — that demonstrates why your current financial situation makes repayment impossible. You should be ready to make a lump-sum offer. Most lenders prefer settlements that involve a one-time payment. While it doesn't have to be the full amount you owe, you'll typically need to come up with 50% to 70% of the balance to get their attention. If you don't have that kind of cash, some lenders may allow a short-term payment plan, but this usually depends on the age and size of the debt — and their willingness to negotiate. You'll need to be persistent — or get help. Debt settlement negotiations can be drawn-out and stressful. You can try handling it yourself, but some borrowers choose to work with a reputable debt relief company instead, which can result in a better outcome due to the debt relief expert's negotiation experience and relationships with creditors. Just be cautious, as not all companies are legitimate and many charge steep fees. Some companies also have minimum debt requirements as well (a minimum of $7,500 is typical), so make sure you meet those requirements as well if you plan to get professional help. What to do if you don't qualify for personal loan debt forgiveness If you're unable to qualify for personal loan debt forgiveness, here's what else to consider: Look into debt management plans. If you're not eligible for debt forgiveness, a credit counseling agency might be able to help you through a debt management plan. With a debt management plan, the counselor works with your lender to lower your interest rates, reduce or remove fees and consolidate your payments. You still repay the full balance, but often on more manageable terms. Refinance or consolidate your debt. If your credit is still in decent shape, you might qualify for a debt consolidation loan with a lower interest rate to pay off your existing one. This doesn't reduce the amount you owe, but it can make your monthly payments more affordable. Be cautious, though, as refinancing won't help if you can't keep up with payments or if you're already behind. Stay in communication with your lender. Silence can make things worse. If you can't make a full payment, reach out to your lender. Many are willing to work with borrowers who show initiative and good faith — especially if you're proactive about your situation. The bottom line Getting personal loan debt forgiven isn't easy, but it's not impossible, especially if you're dealing with financial hardship and have fallen behind on payments. Debt settlement can offer a way to reduce what you owe, but it requires persistence, documentation and sometimes cash on hand. And if you don't qualify, don't panic. Other solutions like debt management plans or refinancing could help make your debt more manageable, so be sure to explore every option available before your situation gets worse.
CBS News
28-05-2025
- Business
- CBS News
3 reasons to pursue credit card debt forgiveness this June, according to experts
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Credit card debt forgiveness may be a viable way to improve your debt situation if you apply this June. Boy_Anupong/Getty Images Inflation may have cooled slightly over the last few months, but consumers still aren't getting a break on their credit cards. The average credit card interest rate is well over 21%, and overall credit card balances are up year-over-year, too (they currently total $1.18 trillion — a 6% jump over 12 months ago). When you throw in the costs of living and prices on many goods and services are up, digging out of credit card debt can be a challenge these days — even with proven strategies, like the snowball and avalanche methods. For some consumers, exploring a more drastic option like credit card forgiveness may be necessary. This is when your creditor agrees to let you settle your debt for a lower amount than you owe, typically via a lump sum payment. If you're a credit card user suffering under the weight of high-rate debt, you might want to consider credit card debt forgiveness this June. We asked some experts why this could be the smart move to make now. Start by checking your credit card debt forgiveness qualifications here. Why you should pursue credit card debt forgiveness this June, according to experts Here are three big reasons why credit card debt forgiveness could make sense for you this June: Credit card rates are high and likely not dropping anytime soon Rates are high right now, and while overall interest rates tend to drop pretty quickly when the Federal Reserve reduces its rate (something experts say will likely happen once or twice more this year), credit card rates don't follow the same path. For this reason, you may want to explore credit card forgiveness sooner rather than later. "When the Fed starts cutting, credit card rates are usually the last to come down," says Stephan Shipe, a flat-fee financial and investment advisor at Scholar Financial Advising. This means it could be a while before rates on credit cards start to fall. And even when they do? Consumers shouldn't expect anything major, experts say. "If the Fed cuts rates later this year or next, we're not likely to see credit card interest drop dramatically," says Howard Dvorkin, chairman of "Any changes will be slow and small." Explore your credit card debt relief options here to learn more. It can take a while, so starting soon is important If credit card forgiveness is anywhere on your radar, getting the process started soon should be a priority. According to Dvorkin, it can take anywhere from 24 to 48 months to complete successfully, sometimes even longer. "The sooner you start, the better," Dvorkin says. "If you're paying 20% or more in interest, waiting costs you money. Every day you delay, that interest compounds. You're not just standing still — you're sinking deeper." As Dvorkin noted, not only does waiting mean more interest charged and higher balances (once that interest is compounded), but it also makes the cycle of debt even harder to get out of. "If you're considering it, it would be important to start the process soon, especially if rates are high on your current debts," says Bruce Maginn, advisor at Solomon Financial. It hurts your credit less than other options If you're nearing the point where defaulting on your debt or even filing for bankruptcy is on your mind, then seeking out debt forgiveness needs to come first — and fast this June. For one, defaulting is going to mean a big ding to your credit score, or it could even lead to wage garnishment. And filing for bankruptcy? That's even more damaging. "Bankruptcy might be quicker and cheaper in terms of total cost, but it also carries a much heavier long-term credit impact," Dvorkin says. "It wipes the slate but leaves a mark that stays for up to 10 years." Forgiveness looks better to future creditors, too, so it helps you keep the door open to future loans and other financial options you might need down the line. As Dvorkin puts it, "It shows you made an effort to repay." The bottom line If you're dealing with a lot of credit card debt, seeking forgiveness might be an option. But take note: It will have an impact on your credit, and it could take a while. For these reasons, Shipe says it's best reserved as a "second-to-last resort" (bankruptcy is last). "It should not be entered into lightly," says David Johnston, managing partner at Amwell Ridge Wealth Management. "If what you owe has grown to an unmanageable level, you don't see your income rising to meet the debt service obligations, or if you are on the verge of having your home foreclosed upon, then these extreme measures may be worth exploring."
