Debt relief loans aren’t right for everyone — and they might not be right for anyone. If you can’t qualify for debt consolidation with most lenders, it's often because the repayments would be outside of your budget. In these cases, other types of debt relief might be more helpful than a debt relief loan with more flexible requirements.
What is a debt relief loan?
A debt relief loan is most often a type of debt consolidation loan available to people with fair or bad credit. A debt consolidation loan is an unsecured personal loan that you can use to pay off other unsecured debts with one fixed repayment.
Often, you can’t qualify for a debt consolidation loan unless you have a credit score of 670 or higher. Companies advertising debt relief loans often accept low credit scores. But they also charge rates closer to 36% — the maximum many states will allow.
Is taking out a loan to pay off your debt a good idea?
Taking out a loan to pay off debt isn’t always a good idea. If you have good credit and owe less than half of what you make in a year, you might be able benefit from debt consolidation. But with larger debts or bad credit, a debt consolidation loan likely won’t give you a lower rate or monthly repayments within your budget.
Also, avoid taking out a loan to cover a month or two of debt repayments when you’re in a jam. While it might preserve your credit score in the short-term, it will increase your personal debt load and your future monthly expenses. Instead, reach out to your lender and ask about deferring your loan for a few months or reworking your loan terms.
Alternatives to taking out a loan to pay off debt
If you can’t qualify for a debt consolidation loan from most lenders, that’s a signal that it’s not the right solution for you. Instead of looking for a debt relief loan, consider these alternatives.
- Credit counseling. Set up a meeting with a credit counselor to go over your budget and figure out what steps you need to take to get out of debt and rebuild your credit.
- Negotiating with your creditors. Reach out to your creditors and ask to rework your repayment terms if they’re outside of your budget.
- Debt management. Hire a professional to renegotiate your rates and debt repayment terms — for a fee.
- Debt settlement. As a last resort, hire a professional to negotiate down your debt over a few years — for a fee of around 20% of the debt you enroll in the program.
Not sure where to start? A credit counselor can often point you in the right direction. Ideally you won’t have to pay anything for credit counseling, though some might charge a small fee.
Whichever option you choose, research it thoroughly before you decide on a service to make sure it’s legit.
Compare debt relief companies
Use the table below to compare the costs and requirements of different debt relief companies. Click on the link with the company’s name to read our review. Or, hit Get started to sign up.
A debt consolidation loan might not be the best choice if your debt is too high or you don’t have the credit score to qualify for most personal loans. Read our guide to debt relief to learn about your other options — and what to watch out for while you navigate your way out of debt.
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