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What’s the Cheapest Way to Resolve Debt?

The depths of the COVID-19 pandemic seem to be in the rearview mirror (for now), but for a lot of Americans, the effects still linger. Many have emerged from the crisis in far worse shape financially than they were in 2019. 

As much as at any time in recent memory, the uncertainty and stress of trying to “keep it all together”—health, employment, business, family—can be overwhelming. On top of this, illness, job loss, divorce, and other sudden events have caused unforeseen financial strain for many Americans. In 2020, consumer debt spiked to $14.56 trillion, leaving many searching for relief. Added to that is the mental anguish of feeling like you’re drowning in debt. Believe us, we understand. We talk to people daily who are struggling with these realities—and our heart goes out to anyone who’s struggling with debt.

However, things don’t have to feel hopeless! There’s help available. It is possible to find your way back to good financial health—and attain the feeling that you can hold your head up high, knowing your bills are paid in full and you have a solid financial cushion to fall back on.

For those struggling to repay outstanding debts or who feel like they can’t afford to pay back what they owe, we believe the best place to start is with a strategy known as “debt settlement.” With this option borrowers can pay off their outstanding debts for less than the full balance owed. Depending on your situation, this could be a faster and cheaper way to resolve your debt. A good first step is to see how much you could save using this debt calculator.

How debt settlement works

Debt settlement is a debt reduction strategy that involves hiring a trusted advocate, such as a reputable debt settlement company, to approach your creditors and negotiate on your behalf to reduce the amount of your debt. Here’s how the process works:

  1. Free Consultation – We review your specific situation and provide you with a personalized plan. 
  2. You Save – You make affordable, monthly savings deposits into a federally insured savings account. 
  3. We Negotiate – We work with your creditors on your behalf to reduce the amount that you owe. 
  4. Settle Your Debt – We leverage your savings to negotiate with each of your creditors until each account is settled and you are debt free. 

With this strategy, we’ve found that people generally become debt-free in as little as 24 and 36 months. 

A few facts about debt settlement

  • Settlement could result in a debt reduction of up to half, or more. In a study, 95% of debt settlement participants saved money after fees.
  • In that same study, consumers saved $2.64 for every $1 in fees paid.
  • When working with a legitimate debt settlement company, you won’t pay any fees until a settlement is agreed upon. 
  • With this method, you could be debt-free in as little as 24-36 months.
  • Debt settlement companies can handle all of the creditor negotiations for you.

Other Options

There are a few other choices out there for reducing your debt, and you may find that one of these is a better fit for your specific situation. However, as we mentioned, in general we’ve found debt settlement to be the best overall approach if you’re looking to save time and money.

  • Debt consolidation: With the debt consolidation path, you take out a large single loan from a single lender—usually at a lower interest rate—then use that loan to pay off your other creditors.
    • Benefits: Debt consolidation is a good way to streamline your debt. After all, a single monthly payment is much easier to manage than several payments.
    • Drawbacks: A debt consolidation loan can be harder to qualify for if you don’t have good credit, and it can have an initial negative impact on your credit as well. Also, unlike with debt settlement, with debt consolidation there is no reduction in the amount owed,  you’ll still be responsible for paying back the full amount.
  • Debt counseling: Debt counseling (or credit counseling) means hiring an advisor to help you figure out the best way forward, financially.
    • Benefits: Good advice never hurts. And It’s always good to have someone in your corner!
    • Drawbacks: Debt counseling is really just a first step. You’ll have to pay the debt counselor—and afterward, you’ll still have to take the next step toward paying off your debts. (We should note that CreditAssociates offers a free, no-commitment debt assessment as part of our debt settlement program.)
  • Bankruptcy: You may have bad feelings about the idea of declaring bankruptcy, but for those who’ve gotten very deep into debt, it might seem like an attractive option. Bankruptcy means legally declaring yourself insolvent, which then “frees” you from your obligations with your creditors. Depending on which form of bankruptcy you choose, your debt could be “forgiven” in full or partially. However, it also gives your creditors a chance to get back some of the debt they’re owed by liquidating your assets (such as your home and cars).
    • Benefits: Bankruptcy absolves some or all of your debt, and that might seem like a pretty big advantage. 
    • Drawbacks: Unfortunately, for most debtors the costs of bankruptcy outweigh the benefits. First off, it won’t work for a lot of kinds of debt, such as child support, alimony, or student loans. Second, creditors can take away your assets. Third, it will affect your credit for years to come (usually 7 to 10), potentially preventing you from taking out new credit cards or applying successfully for loans or mortgages. Lastly, bankruptcy is not “free”—you could be subject to (sometimes hefty) penalties and fees.

The bottom line

If you’re feeling overwhelmed by debt and you cannot afford to pay back what you owe, debt settlement might be a great option for you. Working with a company that specializes in debt settlement can help ensure you settle for the lowest possible amount, as quickly as possible.

With CreditAssociates, it’s easy and free to get started. Call 1-800-983-6693 to learn more by scheduling your free consultation. After a single phone call, you’ll have a lot more knowledge about the best path forward for you—not to mention more peace of mind. If you choose to work with us, we’ll provide a personalized plan that could help get you out of debt in as little as 24–36 months.