Debt relief costs vary widely depending on the method—debt payoff apps are often free or inexpensive, while debt settlement and ban🍰kruptcy can cost thousands of dollars in fees.

Luckily, there are many ways to get out of debt. We’ll go over the costs for five popular debt relief options: debt settlement, credit couဣnseling, debt consolidation, debt payoff apps, and bankruptcy.

Costs of Debt Settlement

Debt settlement companies are usually the first results to pop up in Google if you search for debt relief. These companies seem to have large marketing budgets and plenty of allure. Who wouldn’t want to settle their debt for less✅ than they owed, especially consideringꦅ there are no upfront fees?

Unfortunately, the costs of debt settlement aren’t always obvious. These companies require you to stop paying your debts entirely, instead paying into a third-party savings account. They’ll use this money as a bargaining chip to negotiate a lump-sum settlement payment for less than you owe—but this means you’ll end up defaulting on your debt. As you might eꦜxpect, this can be very costly in the long run.

Debt settlement companies start with a free consultation to go over your financial situation and your credit. This gives you a chance to learn about the company and what it can do for you, but don’tꦫ be surprised if the representative tries to sell you the service.

Now, let’s consider the 澳洲幸运5官方开奖结果体彩网:direct fees for debt settlement:

• Settlement fees: These fees range from 14% to 30% of your debt, but they’re only paid on debts that the company successfully negotiates. Some debt settlement companies base this fee on the amount of settled debt, while others base it on the amount of enrolled debt (again, only concerning accounts that are settled; if the company can’t negotiate one of your debts, you wouldn’t pay fees for that debt).
• Monthly account fees: You may be charged a setup and/or monthly fee for the third-party savings account that debt settlement companies require you to use to build up your lump sum payment.

More importantly, the indirect costs of debt set🍸tlement include:🍸

• Income taxes: You’ll generally be required to 澳洲幸运5官方开奖结果体彩网:pay taxes on the amount of 澳洲幸运5官方开奖结果体彩网:debt your creditors forgive when you file your taxes at the end of the year. Depending on your tax bracket, that could amount to 10% to 37% (in 2024 and 2025) of the amount that your creditors forgave.
• Credit damage: Creditors will report late payments, defaults, collections, and debt settlements on your credit reports, which can cause 澳洲幸运5官方开奖结果体彩网:serious damage to your credit. A closed, delinquent account will generally stay on your credit reports for seven years.
• Late payment fees: Creditors will charge late payment fees, which can cause the amount you owe to increase while you’re not making payments on your debt. These fees add to your balance and can be included in settlements, but if the debt settlement company isn’t successful, you’ll owe all those extra fees, too.
• Unsuccessful debt settlement: Although old, one 2007 Federal Trade Commission analysis found that only about half of people successfully completed a 澳洲幸运5官方开奖结果体彩网:debt relief and settlement program. People who don’t complete the program can end up with worse credit and in more debt than they started with.

Costs of Credit Counseling

Credit counseling is a broad term that refers to any support you get from a dedicated credit counseling organization, most of which are nonprofit. These organizations assign a counselor to work with you one-on-one, going over your financial situation and debt profile. They can help you decide on the best way to allevi𝓀ate your debt burden—including secured debt such as mortgages and student loans—and may even c🍷ontact your creditors on your behalf.

Credit counseling agencies also offer 澳洲幸运5官方开奖结果体彩网:debt management plans (DMPs), working with your creditors to modify your debts so they’re more affordable (these plans may only be available for unsecured debts). The agency may be able to negotiate lower interest rates and/or lower monthly payments for debts in the DMP. You’ll send in one monthly payment to the agency until all of the debts included in the DMP are paid off in full, which typically takes three to five years.

Most services provided by credit counselors are free (including your initial consultation), unless you 澳洲幸运5官方开奖结果体彩网:sign up for a debt management plan. Fees for a DMP may be based on the customer’s income. Here are the associated costs o🌌f the major players in the industry, according to Investopedia research:

• Debt management plan setup fee: $0 to $99
• Debt management plan monthly fee: $0 to $75

You typically need to close any credit cards you enroll in a DMP. And, although credit counseling and debt management plans don’t have a negative effect on your credit score themselves, 澳洲幸运5官方开奖结果体彩网:canceling your credit cards ma🍒y bring your score down. Your credit reports may also show accounts in DMPs, and lenders can ꦆsee that information.

Costs of Debt Consolidation/Refinance

Consolidating your debt can be a good option if you have a decent handle on your finances already, and you’re just looking to save some mo♛ney or get a more manageable payment. You can consolidate multiple accounts into a single monthly payment, or just refinance a single debt account.

Debt consolidation usually takes two forms: taking out a personal loan for a lower interest rate and/or a different term length, or opening a new 澳洲幸运5官方开奖结果体彩💝网:0% APR balance transfer credit card featuring a months-long interest-free runway to help yo🍸u get ahead of your debt.

If you get a lowe𝔍r rate, you can save money over time. If you get a longer repayment period, you may get some breathing room with a lower monthly payment—but this can make the debt mওore expensive overall.

H🍰🐻ere are the costs you can expect to pay for a personal loan:

• Loan interest: Loans charge interest from the start, albeit at a lower overall rate on average than credit cards (unless you get a 0% APR credit card).
• Origination fees: Loans often come with 澳洲幸运5官方开奖结果体彩网:origination fees ranging from 1% to 6% or more, especially if you don’t have good or excellent credit.

And here are the main costs for a bala🌱nce🧸 transfer credit card:

• Annual fees: Balance transfer cards may come with annual fees, which are sometimes waived in the first year. The best cards don’t charge such a fee, however.
• Balance transfer fees: Most balance transfer cards charge a 澳洲幸运5官方开奖结果体彩网:balance transfer fee, typically ranging from 3% to 5% of the transfer amount.
• Credit card interest: A 0% APR balance transfer card will start charging interest at the end of the 0% intro period, giving you a good incentive to pay down as much as you can during the interim. It’s also possible to lose your 0% rate if you miss a payment. And, if you make any purchases with the card, that spending will accrue interest at the purchase APR (which may or may not be 0%).

The cost for you depends on your personal credit and the overall interest rate environment to a large extent. If you’re in a low-interest-rate environment and you have excellent credit already, you’ll likely qualify for very inexpensive loans and credit cards. If you have bad credit and/or rat༺es are high a𝕴ll around, it may be hard to find options for less than you’re already paying. 

Costs of Debt Payoff Apps

Anyone can use debt payoff apps to help manage or get ahead on their debt, even if they’re not currently struggling. There are many types of apps and they work differently.♏ Two popular types are debt planners and 🌞round-up apps.

Debt payoff planners help you calculate the best way to pay down your debt (such as with the 澳洲幸运5官方开奖结果体ꦑ彩网:debt avalanche or debt snowball method), while round-up apps link up with your debit or credit cards to round up each purchase you make to the nearest dollar. That difference gets saved up and periodically sent to your lender as an extra payment to help you make quicker debt payoff progre෴ss.

Here are a few examples of debt payoff apps, along with 澳洲幸运5官方开奖结果体彩网:their costs.

Costs of Bankruptcy

Bankruptcy is the last resort for many people, allowing them to discharge many common debts in court. There are two main 澳洲幸运5官方开奖结果体彩网:types of bankruptcy you can file: Chapter 7, where you sell most of your assets to pay off your debt (barring certain exemptions that vary by state, which can include your house), and Chapter 13, which allows you to make payments for three or five years.

After you complete the req🍃uirements of your partic𝕴ular bankruptcy type, you’ll be free of those debts. Here are the costs you can expect to pay along the way:

• Court costs: You’ll typically need to pay over $300 to file various documents with your local bankruptcy court (fee waivers or installment payments are sometimes accepted).
• Attorney fees: Expect to pay between $1,000 and $2,000—or more—to hire an attorney.
• Credit counseling/debtor education course fees: Those who file bankruptcy must enroll in credit counseling and debtor education courses. The price for each course is capped at $50, although you’ll often pay less than half of that.

Unlike debt settlement, you generally won’t owe a large tax bill on any debts that are discharged in bankruptcy proceedings. It still co♎mes with a few other drawbacksꦫ that you should know about, however:

• Credit damage: Bankruptcy stays on your credit reports for up to 10 years. During that period, it may be difficult for you to get approved for credit, utilities, and even rental housing. The severity of the negative effects decreases over time, however.
• Social stigma: People who file for bankruptcy may be treated poorly by others, even if the debt wasn’t their fault in the first place.

Still, the benefi🍒ts of discharging an overwhelming amount of debt may be worth the c𓃲ost.

If 🔜you’re considering bankruptcy, chances are you don’t have a lot of extra money lying around. But there are ways to get help paying for an attorney. “In many cases, those who are filing Chapter 7 bankruptcy—or ‘liquidation’ bankruptcy—will stop paying their debt bills and use those funds to pay for legal help,” said Leslie Tayne, founder a🐷nd head debt relief attorney at . “In other situations, lawyers may offer a payment plan or some other billing situation that makes sense for a person’s financial situation.”

When Should You Seek Debt Relief?

There aren’t any hard and fast rules a♐bout when you should seek out debt relief. However, most experts agree you should consider it if you’re in debt and are having trouble making ends meet, especially if you’ve tried DIY solutions. 

It can be wღise to let your lender know when (or before) you have trouble paying, because some offer hardship programs to help you meet your obligations. And credit counseling services offer free consultations, so there’s little harm in trying. A credit counselor may be able to help you figure out which method is right for your situation.

Other options you can try before—or alongside—deb🐲t relief programs include:

• Starting (or refining) a budget
• Asking for help from family and friends
• Cutting expenses and increasing income

The Bottom Line

You should take the time to consider debt relief costs when deciding on the best option for your financial situation. Howev🐻er, there are sometimes ways to get help paying, even for expensive options like bankruptcy.🐷 

Factoring in the costs is certainly important, but in many cases, it’s better to focus on the method that’s most likely to 澳洲幸运5官方开奖结果体彩网:help you get out of debt in the long run while doing the least amount of damage in the meantime. For that, you’ll need to consider other factors too, such as your relationship with money, your credit, your behaviors, relevant state laws, your family situatio🍎n, future financial goals, and more.