The average amount of personal debt held by Americans is around $38,000, a figure that has increased steadily over the years.

For the majority of people, lending is a productive way to meet their financial and lifestyle goals. However, a significant minority can end up having real problems with debt.

If you’re currently in this situation, you may have asked yourself the question; “how does debt relief work?” It can provide a way out for a lot of people with a problematic borrowing history.

Read on to learn more about debt relief and how it might be of use in your situation.

How Does Debt Relief Work?

Debt relief is a service that companies provide to those struggling to repay their borrowings. Through a few different mechanisms, they work with debtors to find the most productive possible solution to their problems.

The Different Types of Debt Relief

There are many levels of debt relief. The correct relief for you will depend on the severity of your situation.

We’ve looked at a few of the main debt relief tools below.

Credit Counseling

This is the least drastic form of debt relief. During credit counseling, the person you hire will discuss your budget (if you have one) and suggest ways in which you can manage your money more efficiently going forward.


If you owe money to a lot of different creditors, debt consolidation could make life a lot easier for you. It involves a debt relief provider buying up your loans and requiring a single payment from you each month.

This usually saves you money on interest payments, and also leaves you with only one regular payment to keep track of, rather than several bills at different times of the month.

Debt Management

Here, a relief specialist will try to negotiate lower interest rates and better repayment terms on your behalf. Lenders are likely to engage with this if they think it makes recovery of owed monies more likely.

The National Debt Relief program is one means of carrying out debt management. Look for more insight into this scheme here.


This is where a relief provider negotiates with your creditors to try to settle your loans for less than they’re worth. However, lenders are under no obligation to participate in settlement. Even if they do, your credit score will be affected considerably.


This is a last resort, as it involves giving up items of property and causes a lot of damage to your credit score. However, for people in truly dire financial circumstances, it is often the only option left.

Taking Back Your Financial Freedom

So, how does debt relief work? As you can now see, there isn’t one straightforward answer to this question, as it will depend on the specifics of your situation. However, it can provide great results for people in troubled financial situations.

If your debts are spinning out of control, it could be the right choice for you.

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