Will credit card debt forgiveness cover my $25,000 debt?
Inflation fell in September after hitting a 3-year low in August. Unemployment numbers are low and the Federal Reserve just issued its first interest rate cut in more than four years. While these are all encouraging signs for the broader economy, it will take some time for consumers to recover from recent financial troubles. It wasn't that long ago that inflation was at a decades-high and interest rates are still exponentially higher than they were just a few years ago.
Against this backdrop, credit card debt has surged with the average user now owing approximately $8,000 to their lenders. And with the average credit card interest rate hovering near a record 23%, it will take a long time and a concentrated effort to reduce that balance. For many borrowers, it may make sense to pursue debt relief, specifically credit card debt forgiveness. However, there are some limits to what this service can do for borrowers. So, will credit card debt forgiveness cover a $25,000 debt?
See how debt relief can help reduce what you owe here now.
Will credit card debt forgiveness cover my $25,000 debt?
In short: Yes, a credit card debt forgiveness program can cover your $25,000 debt. The minimum balance for this type of service is typically $7,500. But that doesn't mean you'll get your entire balance wiped clean. Credit card debt forgiveness programs typically cover 30% to 50% of the existing balance. So, in this circumstance, you may be able to settle for between $7,500 and $12,500. But you'll need to qualify for that relief. Specifically, most companies will want you to provide all of the following:
- Debt over $7,500: This applies in this circumstance but if you owe less than that amount you may be better served by turning to a debt relief alternative.
- Financial hardship: If you can demonstrate you're currently experiencing a financial hardship that's preventing you from paying your balance, you can improve your chances of approval. This means showing the loss of a job, medical expenses, or more. You'll need to provide documentation demonstrating this hardship.
- Behind on payments: You're more likely to get help with forgiving a balance if you're already behind on your monthly payments. If you've been staying up to date, even if with minimal payments, creditors are less likely to help, since that typically demonstrates an ability to make payments, just at a slower pace.
If you currently qualify for forgiveness then consider contacting a servicer now. With credit card rates high and predicted rate cuts unlikely to make a material difference in what you owe, it makes sense to be proactive.
Start tackling your high-rate credit card debt now.
What about a debt consolidation loan?
Credit card interest rates are high now but personal loans are much lower (averaging just under 13% compared to credit card rates at 23%). It can be beneficial for many borrowers to then consolidate their existing credit card debt with a lower-rate consolidation loan. Rates will depend on your credit score and profile but, if your score is high, you will likely qualify for a low-rate loan. This won't eliminate a portion of your debt as a forgiveness plan would, but you also won't have to deal with the credit score ramifications that most forgiveness plans result in either.
The bottom line
If you meet certain criteria, a credit card debt forgiveness program can cover a $25,000 balance. But it won't cover it in its entirety. And, in many cases, borrowers may be better served by exploring alternatives like debt consolidation loans. No matter which option you choose, don't let your debt stagnate, particularly with today's elevated rates. Explore all of your best debt relief options and choose the one that works best for your financial situation right now.
