Is debt relief worth it as interest rates drop? Experts weigh in

Over the last year, credit card debt climbed 5.8% to $1.14 trillion, and 9.1% of credit card balances became delinquent, according to the New York Fed. The debt increase may be partially attributed to rising inflation and higher prices for everyday purchases. Also, repaying credit card debt hasn't gotten any easier, with average interest rates spiking from 16.45% in 2021 to 22.76%, according to the most recent Federal Reserve data. 

It's difficult—even impossible for some—to create a strong financial foundation for the future when most of your money must go toward bills and debt.

Fortunately, Americans stifled by debt should get good news this week, as the Federal Reserve is expected to lower interest rates. The decision could result in lower credit card rates, which may provide a measure of relief for cardholders struggling to keep up with high interest payments.

For those considering debt relief to ease the strain on their budget, the question arises: Is it still worth it if interest rates drop? We asked some experts for their thoughts.

Learn more about how debt relief can help here now.

Is debt relief worth it as interest rates drop?

Here's when debt relief is (and isn't worth) pursuing as interest rates fall, according to some experts:

When debt relief is worth it as interest rates drop

Yes, debt relief services can be worthwhile for those struggling with debt, even though interest rates are falling, says financial attorney and author of "Life and Debt" Leslie H. Tayne, Esq. 

"Some credit cards have APRs near 30%, so even if interest rates drop, those struggling with debt will still be trapped in a cycle where they cannot pay it off. Everyone's circumstances are different when it comes to debt and their ability to pay it off, but a debt relief service might be able to help with budgeting and managing finances, especially if credit card debt is getting out of control."

Any interest rate reduction by the Fed is expected to be modest, at least to start. 

"The possibility of a Federal Reserve interest rate cut in September—priced in nearing 75%—of 25 basis points will likely have only a few percent reduction in consumer credit card rates," says Corey Voorman, president and founder of Voorman Investment Counsel. "For individuals who have been struggling with debt for years this will provide little relief."

Voorman says debtors should face their debt and quantify it, which isn't a pleasant task. "Many individuals never face their debt and avoid looking at statements and tallying the full extent of what they owe. They then should develop a plan to pay it off. This plan, many times, should include consulting with a debt relief company or qualified bankruptcy attorney."

Start exploring the best debt relief options available to you here today.

When debt relief isn't worth it as interest rates drop

Deciding whether to pursue debt relief is a personal decision. As Anna Sergunina, CEO of Main Street Planning, notes, debt relief may be helpful for some, while others might benefit more from alternative options.

"For someone who is struggling with debt, debt relief service might help create a structure and a plan to pay off the debt first, as well as possibly negotiate the terms—interest rate and timeline." Sergunina explains that those capable of managing their debt themselves may not need debt relief services, which can charge fees and impact your credit score. "They may benefit more from debt consolidation, refinancing or strict budgeting, especially if they can take advantage of lower interest rates in the future," says Sergunina.

Should you wait for interest rates to drop further before seeking debt relief?

Tayne advises consumers not to wait for interest rates to drop before seeking debt relief services. "Rates are expected to fall but only by a quarter point, and that will take time to trickle down to the consumer's pocket. If you are currently struggling, seeking appropriate help sooner rather than later always makes sense. Clients often tell me that they wish they started sooner," says Tayne.

The bottom line

Keep in mind, qualifications for debt relief can vary depending on the type of relief you're seeking. For example, you may need to show financial hardship for a debt settlement while you'll likely need good credit and reliable income to qualify for a debt consolidation loan. 

If you're considering using a debt relief service, check the reputation and track record of any company you're considering. Along those lines, the Consumer Financial Protection Bureau (CFPB) advises referring to your state attorney's office or regulator to check for company complaints. Also, research some of the best debt relief companies in different categories to see which is the right fit.