Do Debt Relief Programs Work?

Debt relief programs offer help to those who feel like they are drowning in debt. When you find yourself in a position with a large amount of debt, the promises made by many debt relief companies can sound attractive. While some of these companies can help, others might be scams.

Debt Settlement

Many of the debt relief companies on the market offer debt settlement as their main benefit. With these programs, you allow the company to negotiate with your creditors on your behalf. They get the creditors to agree to take less than you owe if you will pay a lump sum. You then give the debt relief company a lump sum of money to pay the creditor. The debt relief company will keep a percentage of the money and use the rest to pay the debt.

Debt Management Plan

Credit counseling companies often offer help through a debt management plan. With a debt management plan, you allow the credit counseling service to negotiate lower interest rate on your accounts. Then you set up a monthly payment that goes directly to the credit counseling service. The credit counselor then sends the appropriate amount of money to each of your creditors. The debt management plan takes a fee from each one of your payments for this service. With this kind of plan, you pay off your debts over several years.

Credit Score Damage

When signing up with a debt relief company, you may want to think about the impact that it can have on your credit. When you use a debt settlement company, it can have a negative impact on your credit. Settling a debt involves breaking the terms of your original agreement with the creditor. The creditor will report this on your credit report and it will drop your score. With a debt management plan, you will not have any ill effects on your credit score, although you may be prevented from taking on additional credit while in the program.


Some of the companies that promise to help customers with their debt are nothing more than scams. These companies charge large upfront fees and then do not deliver on the promises later. When you are considering signing up with a debt relief company, you need to make sure that you are dealing with a legitimate business. You can check with the Better Business Bureau to make sure that they do not have a large number of complaints against them.