6 Signs It’s Time to Seek Debt Relief

Managing debt can sometimes feel like juggling, trying to keep multiple balls in the air at the same time. If you’re beginning to feel the strain or the balls have started dropping, it may be time to consider seeking debt relief. 

Debt relief resources can often help you regain control. Whether it’s a credit counselor, a financial advisor, or a debt relief program, it can be a lifeline to reach out for help when you need it. You don’t have to face these struggles alone, and with the proper support and guidance, you can work towards a more secure financial future.

But how do you know that it’s time to seek that help? Here are 6 signs that indicate you may need to seek debt relief.

1. You’re Struggling to Make Minimum Payments

The first sign is struggling to make the minimum payments on your debts. If you barely make ends meet each month or fall behind, it may be time to seek assistance. According to a survey from the National Foundation for Credit Counseling (NFCC), 2 in 5 American adults (79 million people) carry credit card debt from month to month. If you’re among these people, know that options are available.

2. You Have High-Interest Rates

High-interest rates can be a big problem, particularly with credit cards. The average credit card interest rate is more than 24% in 2023, and it can go much higher. If a large portion of your monthly payment goes toward interest rather than the principal balance, it might be time to consider debt relief.

3. Your Debt Is Increasing

If your overall debt is increasing rather than decreasing, that’s a clear sign that you may need help. This might be due to high-interest rates, late fees, or simply spending more than you can afford.

4. You’re Sacrificing Quality of Life

If you find yourself sacrificing the quality of life to pay off debts—like avoiding necessary medical treatments, skipping meals, or being unable to afford basics —it might be time to seek debt relief. In a recent survey by Bankrate, nearly half of Americans reported that they or their partner have taken on debt to pay for necessities.

5. You’re Using Debt to Pay Debt

Using one form of debt to pay off another, like taking out a cash advance on one credit card to make the minimum payment on another, is a red flag. It can be a big red flag signaling that your financial situation is becoming unsustainable.

6. You Experience Constant Stress and Worry

The mental stress caused by debt can be debilitating. A study in the journal “Social Science & Medicine” found that people with high levels of debt had a 13% higher risk of mental health problems. If debt is causing you constant stress or affecting your mental health, it can be a sign that you need help.

What is Debt Relief?

Debt relief is a broad term that covers various strategies to help you reduce or eliminate your debt. These strategies include negotiating with creditors to lower your interest rates or balance, consolidating debts into a more manageable loan, or even bankruptcy in extreme cases.

Common Debt Relief Options and Methods

Pros and Cons of Debt Relief Programs

Like any financial decision, debt relief programs have advantages and disadvantages.

On the positive side, they can: 

• Give you a clear plan for paying off your debt.
• Provide relief from collection calls and stress. 
• Reduce your monthly payments.
• Lower your interest rates. 

However, there are downsides. Debt settlement, for instance, can lead to significant credit score damage, as creditors typically will only negotiate if you’re behind on your payments. There’s also no guarantee that creditors will agree to negotiate. 

Debt consolidation loans can cost more over time if they extend the repayment period. Additionally, they often require a good credit score to get favorable rates. 

Bankruptcy can stay on your credit report for up to ten years, making it hard to get credit, buy a home, or sometimes even get a job.

Tips for Avoiding Debt Relief Scams

Unfortunately, not every company out there has your best interests at heart. Be wary of companies that charge upfront fees, make guarantees about eliminating debt, or tell you to stop communicating with creditors.

To avoid debt relief scams, look for agencies accredited by the NFCC or the Financial Counseling Association of America (FCAA). 

Here’s a list of companies that the NFCC or the FCAA approves:

• GreenPath Financial Wellness is a non-profit that offers free debt counseling. They are NFCC accredited and have been helping people with debt since 1961.
• Money Management International (MMI) offers a wide range of services, from debt and budget counseling to foreclosure prevention programs. They’re NFCC accredited and boast more than 60 years in the business.
• InCharge Debt Solutions is a non-profit, NFCC-accredited organization that provides free debt counseling and education.
• American Consumer Credit Counseling (ACCC) is an NFCC-accredited non-profit organization offering confidential credit counseling, debt management services, and financial education.
• Cambridge Credit Counseling is an NFCC-approved non-profit credit counseling agency offering various debt relief services.
• Take Charge America is an FCAA-approved non-profit agency providing credit counseling, debt management services, and student loan counseling. 
• Credit.org is an NFCC-accredited non-profit service offering free credit counseling and debt management advice.

Debt Relief Strategies to Avoid

Certain strategies might seem like quick fixes but can cause more harm than good. These include:

• Borrowing against home equity: While this can provide lower interest rates, it puts your home at risk if you can’t repay the loan.
• Taking money out of your 401(k): This can result in hefty tax penalties and sacrificing your future financial security.

Debt can feel overwhelming, but you have options. Do your research, understand the pros and cons, and consider seeking professional advice to make the best decision for your situation. Don’t rush—take the time to think through all the implications, so you can choose a path that leads toward financial stability.