When card balances get out of hand, the options can blur together. They work very differently.
Debt consolidation loan
You take out one personal loan and use it to pay off several debts. You still owe the full amount, but often at a lower fixed rate with a single payment and a clear end date. It requires credit good enough to qualify for a better rate than you have now.
Credit counseling and debt management plans
Nonprofit credit counseling agencies review your budget and may set up a debt management plan. You make one monthly payment to the agency, which pays your creditors, often at reduced interest rates the agency has arranged. Your accounts are usually closed, and plans commonly last three to five years.
Debt settlement
A settlement company negotiates with creditors to accept less than you owe. You typically stop paying creditors and save into a dedicated account while negotiations happen. That usually damages your credit, and creditors may still pursue collection. Forgiven amounts can be taxable.
| Consolidation | Counseling (DMP) | Settlement | |
|---|---|---|---|
| Reduces balance owed | No | No | Often |
| Credit impact | Mild | Mild to moderate | Significant |
| Who it suits | Fair to good credit | Steady income, high rates | Serious hardship |
Protect yourself
Under federal rules, debt settlement companies selling by phone may not charge fees before settling at least one of your debts. Be cautious of anyone who asks for large upfront fees or guarantees results.
Compare debt relief options.
See optionsThis guide is general information, not financial, legal, tax or insurance advice. Terms vary by provider and state.