Debt Help: From DIY to Professional

Debt can often feel insurmountable — but it doesn’t have to. If you’re tired of making payment after payment to see only a budge in your balances, it might be time to seek professional debt help. 

A pro can give you the right tools to manage your debts, and they can even customize a path to help you pay them down more effectively. Are you ready to get help with debts that are holding you back? Here’s what you need to know.

What kind of debt help is out there?

Debt help comes in several forms. They range from simple counseling and budgeting services to more hands-on tactics, like negotiating with your creditors. 

Here’s a quick synopsis of the various forms of debt help you can seek:

• Credit counseling: A credit counselor can offer guidance on paying down your debts. They'll look at your full financial picture, including your income, credit card balances, loans, and more, and advise you on how to best manage them. They can also assist with budgeting, improving your credit score, and achieving other financial goals you might have. Use this guide to find the right credit counselor for you.
• Debt management plans: Debt management plans are tools that credit counselors or other debt professionals use to help you pay off your debts within a certain timeframe. With a DMP, you'll pay your credit counselor a monthly fee, which they'll then use to pay your various creditors. Often, creditors will agree to reduce your interest rate or waive fees for borrowers on DMPs. You may need to agree to stop using your credit cards and avoid new debts to get on a DMP.
• Debt settlement: Debt settlement is when a debt professional negotiates a reduced payoff amount with your creditors. You’ll typically need to deposit money into a designated savings account each month. When the balance meets a certain threshold, your debt professional will pay the creditor an agreed-upon settlement amount and close out your debt.
• Debt consolidation: Debt consolidation is when you use a single loan to pay off all your debts. This strategy rolls them into one, making it easier to pay each month, and it often reduces your interest costs. Consolidation is often a smart move if you need help with credit card debt. (Credit cards typically carry much higher interest rates than loans, so consolidating can save you on interest).
• Debt refinancing: Refinancing replaces your debt with a new one — usually with a lower interest rate or different terms. For example, if you’re having trouble making your car payment, you might refinance your loan into a longer-term one. This approach would spread your balance out more and reduce your monthly payments. 

The right type of debt help depends on the severity of your debt problems and the types of debt you have. For example, if you need help with credit card debt, consolidation may be a good choice. If you have a variety of debts, a DMP or settlement plan may be more fitting. If you're unsure which option is best for you, consider speaking to a credit counselor or financial advisor. They can offer you personalized advice for your specific situation.

Where can I get debt help?

Credit counseling agencies and debt relief companies both offer help with debt. Credit counselors are often nonprofit organizations that offer free or low-cost services. Keep in mind, though: They are limited in the help they can provide. 

Debt relief companies will charge a fee, but they often deduct it from the savings they secure on your behalf (if they settle your debt for less, for example). Always make sure you understand the payment structure when working with a debt relief company. A legitimate one will not charge you an upfront fee nor guarantee any results. 

In some cases, you may be able to get debt help from your bank or credit union. These services will typically look more like credit counseling, though they may be able to recommend options for consolidating or refinancing your debts through their institution.

DIY debt help

You don’t have to use a professional to deal with your debts. There are quite a few ways to pay down or even reduce your debts yourself — as long as you have discipline and are committed to the task.

Here are just a few of the strategies you might use to DIY your debt relief:

• Snowball method: This is a debt payoff method that focuses on your smallest balance first. You put all extra income toward that lowest debt while making minimum payments on all the rest. Once you've paid off the smallest balance debt, you put that extra money toward the next smallest one and so on until you've paid off all of your balances.
• Avalanche method: With this debt payoff method, you focus on the debt with the highest interest rate first. After you’ve paid that balance off, you move to the next-highest-rate debt and so on. This strategy reduces your long-term interest costs the most but can be harder to stick to than the snowball method. (The snowball method offers quick wins that can keep you motivated). 
• Balance transfer card: A balance transfer card is an option if you need help with credit card debt. You apply for a zero-interest balance transfer card and then transfer all the other card balances to the new card. There’s typically a small fee for this (usually 3% to 5% of the amount transferred), which is added to your balance. Balance transfer cards allow you to roll all your credit card balances into one, and they can often significantly reduce your interest costs too. Just make sure you pay off the balance before your zero interest rate expires (typically around 18 to 24 months).
• Refinancing and consolidation: You don’t need a pro to consolidate or refinance your debts. You’ll simply need to choose a lender, secure the lowest rate possible, and use that loan to pay off your existing debts. If you go this route, make sure to compare a few different lenders. Rates and terms can vary quite a bit between companies.

Bankruptcy is also something you can explore and possibly take on yourself, but only after exhausting all other options. Though bankruptcy can wipe many of your debts clean, it can also mean losing your assets and ruining your credit. Bankruptcies remain on your credit report for up to 10 years, which could make it difficult to get a loan, buy a house, secure a rental, or even get a job in some industries for quite a while.