If you’re struggling to manage your debt, debt relief and consolidation options are available to simplify the process and help you eliminate what you owe. Both help tackle debt, but the right choice for you may depend on the types of debt you’ve incurred and your financial situation. 

Understanding the difference between debt relief and debt consolidation will help you find the best way to get out of debt and get your finances back on track. 

Debt relief is a way of reorganizing debt to make it easier to pay off. Several types of debt relief exist for different needs and types of debt. Debt relief generally refers to working with creditors (or third parties that work with your creditors) to create a realistic path to eliminate debt. It also allows creditors to recoup some of the funds that you owe. 

Examples of debt relief include:

Debt relief requirements and processes vary depending on the options available to you and your unique situation. 

Consider the following benefits and drawbacks before turning to debt relief programs or strategies:

With debt consolidation, you combine all your debts into one debt, such as a loan, with one monthly payment. Instead of sending payments to several creditors, you have one loan or credit card payment. Debt consolidation options often have lower interest rates than the ones you’re currently paying, so you can typically save money. This, in turn, makes paying off debt more manageable.

Debt consolidation may involve working with a third party, like a nonprofit credit counseling agency, to create a debt management plan. 

You can take advantage of several different types of debt consolidation, depending on your needs and the debt you want to consolidate. These include:

Debt consolidation has advantages and disadvantages, such as:

Debt relief offers several methods to tackle mounting debt balances. It may be right for you if you need outside help to create a debt repayment plan. It’s also a good option if you qualify to reduce the debt you owe, either through debt settlement or forgiveness. 

Debt consolidation can help save money while simplifying debt repayment. It’s an excellent option if you have difficulty keeping track of multiple monthly debt payments. 

If you’re carrying balances on credit cards with high-interest rates, transferring those balances to a new card could help you repay the card issuer over time without interest charges for a long period, provided you can pay off your balance before the regular rate kicks in. 

Debt consolidation also makes sense if you have good enough credit to qualify for lower interest rates on loans or if you have enough equity built up in your home to be eligible for a home equity loan or HELOC. 

Consolidating certain federal student loans with a federal Direct Consolidation Loan can unlock access to additional repayment plans that can lower your monthly payments, as well as student loan forgiveness programs. 

The debt settlement process can be challenging. The process varies depending on which method you use, but the following general steps apply:

1. Survey your finances. Debt settlement allows you to pay a smaller amount than you owe, but you typically have to make a lump sum payment. Determine how much you can afford to pay to settle your debt. 
2. Determine the best option. You can hire a debt settlement company to work with creditors on your behalf, but it can be risky. For example, some debt settlement companies may tell you to stop making payments on your credit cards, which could lead to late fees and interest charges. Working with a credit counselor from a nonprofit agency may be a better route to take. You can also opt to work with creditors on a debt settlement plan yourself.  
3. Do your homework. Unfortunately, debt settlement is known for scams. Research settlement companies to find reputable options. Consider contacting your state’s consumer protection office or attorney general to find out if the company has complaints on file. You can also read customer reviews through organizations like the Better Business Bureau. 
4. Work with creditors. Reach out to your creditors if you’re representing yourself, or have the settlement company communicate on your behalf. Negotiate with creditors to agree on a settlement amount that pleases both parties. Be sure to get your repayment or settlement agreement in writing.  

The process of consolidating debt varies depending on the option you choose. Use the following steps as a general guide when consolidating your debt:

1. Choose a method. Choose a method for debt consolidation based on your debt type, the amount you owe, and your credit score (since this can affect whether or not you qualify for a debt consolidation option). 
2. Shop around. Compare multiple lenders or credit card companies to find the best options and rates for you. 
3. Gather the necessary information. You may need to provide personal information and documentation when applying for a loan to verify employment and income. 
4. Apply. Apply for a loan or balance transfer credit card (or other form of debt consolidation). Follow the lender or issuer’s instructions, providing all required documents. The time it takes to process your application may vary depending on the debt consolidation strategy you choose. If approved, follow the instructions to move forward with debt consolidation.