Debt Relief Programs Compared

Understanding the pros and cons to pick the best relief option for you.

Debt relief programs refer to any method of solving debt problems when repayment of the debt using traditional means is not possible. Basically, it provides a way for you to reduce or eliminate the burden of that debt so you can take action faster to regain financial control.

Of course, you have to find the right debt relief option for you needs and unique financial situation if you really want to be successful. The information below is designed to help you understand the various programs you can use to get out of debt. Remember, every situation is different, so if you’re looking for debt relief and want to make sure you’re choosing the right option, an impartial professional opinion can be extremely helpful. So if you’re facing debt problems, call Consolidated Credit today at or complete an online application to request a free debt and budget analysis from a certified credit counselor.

Defining debt relief programs

Debt relief programs are generally pretty broad and can often work on solving problems with multiple kinds of debt. However, in most cases, a relief option will only apply to one specific type of debt at a time. So for instance, consolidation can work with student loans and credit card debt, but you have to consolidate each type separately.

So here’s a basic definition of each type of debt relief program you can use and what types of debt it generally applies to:

Those are basically the five options that you have for debt relief. If none of those will work, bankruptcy is usually your best choice. The courts will discharge your debts by liquidating your assets or arranging a payment schedule for at least part of what you owe – similar to a settlement relief program, except it’s set by the courts.

Relief programs compared side by side

The following table can be helpful as you work to determine which type (or types) of debt relief that you really need:

Deferment Refinancing Modification Consolidation Settlement
What does it do? Suspend/pause payments Reduce interest rate Modify loan terms Roll multiple debts into one payment Eliminate for part of what you owe
Does it work for mortgages? Yes; called forbearance Yes Yes No Called a short sale during sale of property
Does it work for auto loans? Yes, although number of deferments may be limited Yes Possible, but rare Yes, if you have multiple car loans out at once During sale if you’re trading it in, but haven’t paid off loan
Does it work for credit cards? No Yes; known as interest rate negotiation No Yes; can also include other unsecured debts like medical Yes
Does it work for student loans? Yes Yes; federal loan rates set by T-Note index; private set by credit score No Yes; federal loans can be consolidated using government programs Usually only applies to private student loans
Does it work for tax debt? Yes – file a tax extension or file for Currently Not Collectible (CNC) status No No No Yes
Does it cause credit damage? As long as you start paying at end of deferment period, no No No No Yes
Is there a cost to do it? No May be fees applied; for mortgages may face additional closing costs May be fees applied; for mortgages may face additional closing costs Fees depend on type of consolidation plan used Fees typically applied for every debt settled; may have to pay taxes on unpaid amount

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