How to succeed with debt relief

Credit card debt has become a critical issue for millions of Americans over the last few years. With credit card interest rates recently hitting a record high of over 23%, carrying a balance has never been more expensive. This issue is being compounded by rising credit card delinquencies and an increasing number of maxed-out accounts, which showcase the financial stress many people are under in today's economic environment. 

That financial burden is growing, too. Right now, cardholders owe a staggering total of $1.17 trillion on their credit cards, up from $1.14 trillion in the second quarter of 2024. That equates to the average cardholder being burdened by $8,000 in outstanding credit card debt — with many owing much more than that on their outstanding balances. These figures highlight the urgent need for cardholders to find effective strategies to tackle their debt.

Debt relief can provide a path forward, but success requires preparation, strategic choices and commitment. Whether you're exploring debt consolidation, debt settlement or other options, the steps you take now can set the stage for lasting financial freedom.

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How to succeed with debt relief

Navigating debt relief takes thoughtful planning and a clear understanding of your options. Here's how to set yourself up for success during the process:

Understand your debt situation

Before pursuing any debt relief option, take a comprehensive inventory of your financial situation. Calculate your total debt across all accounts, track your monthly income and expenses and determine how much you can realistically afford to pay toward debt each month — as nearly any debt relief option you consider will require you to put at least some money toward what you owe on a monthly basis. This assessment will help you identify which debt relief options are most suitable for your circumstances.

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Do your homework on your options

Debt relief isn't a one-size-fits-all solution. Different methods work better depending on your financial situation, so it's important to fully assess what's available to you. Here are some of the more common debt relief program options to consider:

Debt consolidation

When consolidating your debt, the goal is to combine multiple high-rate debts into one loan with a lower interest rate, making your payments more manageable. Debt consolidation is typically ideal for those with good credit who can qualify for favorable loan terms on their loans.

Debt management

Offered by credit counseling agencies, a debt management plan involves negotiating lower interest rates and fees while creating a structured repayment plan. This option requires discipline, as it often takes three to five years to complete, but can result in lower payments and a streamlined payoff strategy.

Debt settlement

Debt settlement involves negotiating with your creditors to accept a settlement amount that's lower than the total amount you owe. In many cases, these kinds of debt relief programs can result in lowering your balance by 30% to 50%, but while it significantly lowers your debt, it may hurt your credit score and come with tax implications. As a result, this option is typically most suitable for those with serious financial hardship  (such as divorce, loss of income, medical emergency or a major unexpected expense) who can't afford full payments.

Bankruptcy

As a last resort, bankruptcy can discharge most unsecured debts, including your credit card debt, wiping the slate clean. However, bankruptcy also has long-term consequences on your credit and finances, so it's typically best for cardholders who have exhausted all of their other options.

Work with a reputable debt relief professional

If you plan to work with a debt relief company to settle or consolidate your debt, make sure to do thorough research on the companies you're considering, as the quality of the services can vary — and it's not uncommon for less reputable debt relief agencies to make unrealistic promises about outcomes. 

During this process, it can help to look for companies accredited by the American Association for Debt Resolution (AADR) or the International Association of Professional Debt Arbitrators (IAPDA). You should also check reviews from multiple sources, including the Better Business Bureau and TrustPilot. And be wary of companies that:

• Promise specific debt reduction amounts
• Charge upfront fees before providing services, as it's illegal to charge fees upfront except for in limited circumstances 
• Pressure you to make quick decisions
• Guarantee they can stop all creditor calls or lawsuits

Stay committed to the process

Debt relief is not an overnight solution; it requires time, patience and discipline to achieve. To stay on track, celebrate milestones along the way. Acknowledge even the small victories, such as paying off one account, as these can motivate you to keep going. It's equally important to avoid accumulating new debt by committing to living within your means and resisting the temptation to use credit cards. Surrounding yourself with a support system, whether it's friends, family or financial counselors, can also provide encouragement and accountability to help you stay focused on your goals.

Educate yourself for the future

Achieving debt relief is just the beginning; maintaining financial stability requires building healthy habits. Start by improving your financial literacy — learn about budgeting, investing and managing credit effectively. Use credit sparingly and pay off balances in full each month to build a strong credit history. Make sure to also plan for long-term goals, such as retirement, homeownership or other significant milestones, to ensure that you are not only debt-free but also financially secure for the future.

The bottom line

Achieving debt relief is possible, even in today's challenging economic environment, but you'll need to put in some work to keep things on track. By understanding your debt, exploring your options and committing to a plan, you can take control of your financial future. Partnering with a reputable debt relief company, creating a realistic budget, and staying disciplined are also key steps toward success.

Most importantly, though, debt relief isn't just about eliminating debt — it's about creating a foundation for long-term financial stability. With the right approach, you can turn today's challenges into tomorrow's opportunities while regaining peace of mind.