Neither debt relief nor consolidation is inherently "better"; the best choice depends on your financial situation, but consolidation (new loan/card) is for those with good credit managing payments, aiming for lower rates, while debt relief/settlement (negotiating less than owed) is for those already struggling and unable to pay, even if it hurts credit. Consolidation streamlines payments and saves interest if you qualify, while settlement reduces total owed but risks significant credit damage and fees.
Dave's general recommendation is NOT to use debt consolidation, because it tends to mask the problem. You can't pay off debt with more debt.
Cons of debt relief programs include significant credit score damage from missed payments, high fees (often 15-25% of enrolled debt), potential for increased debt during negotiation, risk of lawsuits from creditors, and potential tax liabilities on forgiven amounts, all while offering no guarantee of success or creditor cooperation, making them risky alternatives to traditional repayment.
To pay off $40,000 in credit card debt, create a strict budget, increase income with side hustles, and choose a payoff strategy like the Avalanche (highest interest first) or Snowball (smallest balance first) to accelerate payments beyond minimums, using tools like 0% APR balance transfers or consolidation loans if you qualify to lower interest, while cutting expenses and potentially seeking credit counseling for a formal plan.
First Advantage pretends to be a debt relief company, but it's not. When you read the fine print, you'll see that it gathers your information and sells it to third-party providers, some of which may offer debt settlement services, consolidation loans or other financial products.
However, if you're not behind on payments and your credit score may qualify you for a lower rate, debt consolidation is likely the safer, smarter move. Not only will you be able to streamline the debt payoff process, but you also save on interest and protect your credit.
Dave Ramsey's 7 Baby Steps provide a debt-free journey by first saving a small emergency fund, then using the debt snowball to eliminate all debt (except the mortgage), building a full emergency fund, investing 15% for retirement, saving for college, paying off the home early, and finally building wealth and giving generously.
The 11-word phrase often cited to stop debt collectors is "Please cease and desist all calls and contact with me, immediately," which leverages your rights under the Fair Debt Collection Practices Act (FDCPA) to halt most communication, though it must be sent in writing via certified mail to be legally binding, and collectors can still notify you of lawsuits.
The 2-2-2 credit rule is a guideline for building strong credit, suggesting you should have two active credit accounts (like cards or loans) for at least two years, with consistent on-time payments for those two years, often with a minimum credit limit of $2,000 per account, to demonstrate financial responsibility to lenders, especially for mortgages. It's a benchmark to show you can handle credit well over time, reducing lender risk and improving approval odds for major loans.
No More Than Seven Times in a Seven-Day Period
Under the 7-in-7 Rule, debt collectors are restricted to contacting a consumer no more than seven times within any seven days. This rule applies to all communication methods, whether phone calls, emails, text messages, or other forms of contact.
Tips for Getting Out of Debt When You're Living Paycheck to Paycheck
Freedom Debt Relief's cons include potential credit score damage, high fees (15-25% of enrolled debt), the risk of lawsuits from creditors, and that forgiven debt can become taxable income, plus the process can be slow and isn't guaranteed to work for all debts, with no upfront fee requirement for reputable companies being a key sign of legitimacy.
Complete credit card debt forgiveness is rare, but borrowers may be able to use other debt-relief options like debt settlement instead. Debt relief can have long-term financial consequences, including potential negative credit impacts and tax liabilities on forgiven debt.
Because you'll be encouraged to stop making payments to creditors, using a debt relief company could negatively impact your credit. Your FICO score could drop by more than 100 points, according to the CFPB.
How do I get out of debt with no money?
If your total liabilities exceed your total assets, you're considered insolvent under IRS rules. This insolvency status may exempt you from paying taxes on canceled debt up to the amount by which you are insolvent. For example, if your debts exceed your assets by $5,000, you may exclude that amount from taxable income.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 is a consumer protection law that was enacted to protect consumers from unfair practices by credit card issuers by requiring more transparency in credit card terms & conditions and adding limits to charges and interest rates associated with credit ...
If you really want that credit card debt gone, you need a plan for your money. I'm talking a zero-based budget. It's up to you to tell your money what to do and where to go. And in this case, you need as much of your money as possible going straight toward your debt.