How Do You Qualify for Debt Relief?

The average American carries over $60,000 in debt, making relief programs essential for millions of consumers across the U.S. 

Qualifying for debt relief depends on a variety of factors including your current financial situation, total debt balance, and monthly income. Many professional debt relief organizations help clients pay down debts instead of continually making minimum payments or deferring balances each month. 

If you carry a medium to large amount of debt and need assistance to pay it off, you’ll likely qualify for debt relief. 

Who Qualifies for Debt Relief?

Debt relief is an effective solution for strategically eliminating heavy balances on unsecured debts like credit card accounts, medical bills, personal loans, and some student loans. Secured debts like mortgages and car loans don’t qualify for debt relief programs like debt settlement, consolidation, or management. 

But what does it take to qualify for debt relief, and how can consumers discover what programs work best for their financial goals? The answer depends on the type of debt relief you pursue and how much debt you carry. 

Debt settlement organizations typically require clients to have a minimum debt balance. Companies like National Debt Relief and TurboDebt work with clients who carry at least $7,500 in unsecured debts, while others can require up to $25,000. 

Debt management companies review clients' finances before offering customized plans. Since debt management requires a monthly lump sum payment, credit counselors ensure consumers have the funds available to pay debts and cover fees. 

For consumers pursuing a debt consolidation loan, lenders offer a range of amounts from $1,000 up to $100,000 with qualifications based on credit score and other financial risk factors. Most other debt relief options don’t take credit score into consideration when you apply.

Since debt relief involves using a portion of your monthly income toward debt repayments, you may have trouble qualifying for certain plans if you’re struggling to meet basic expenses and living paycheck to paycheck. Consider starting a debt relief program when you can free up some money each month through budgeting, scaling back expenses, or supplementing your wages.

What Does the Debt Relief Process Look Like?

Here’s a breakdown of the steps to starting a debt relief program:

1. Find the Best Fit

After researching your options, commit to the program that allows you to pay off debt while pursuing your financial goals. This means looking for a plan that helps you make realistic and affordable monthly payments toward your debts. 

It’s also a good idea to understand your timeline before you start. Certain methods like debt snowball or avalanche and debt consolidation can take longer to make you debt-free.

2. Start an Initial Consultation

Once you determine the most effective method for your debt relief journey, find a partner you trust to guide the process. Reputable debt relief organizations offer free initial consultations and don’t charge upfront fees. 

First, debt relief companies consider your financial situation. During an initial consultation, you’ll talk with a specialist who works to understand your debt and monetary needs. You’ll also answer questions about your monthly income to clarify your debt-to-income ratio. 

3. Enroll in a Customized Program

As a credit counselor or debt specialist learns more about your situation, they’ll offer you a program tailored to your financial goals and monthly income. Once you qualify, you’ll set up a plan and discuss any additional fees for administrating your account, contacting creditors, and setting up payments. 

Now, you can start paying off outstanding balances and count the days until you’re debt-free.

4. Make Consistent Debt Payments

The final step in the debt relief process is to start making monthly payments and stick to your plan. If you lose momentum and fail to make payments, you could lose the benefits of your plan and take longer to pay down debts. 

If you do need to slow down or pause, connect with your debt relief organization. You may be able to adjust your monthly amount or forgo late payment fees. 

Debt Relief Options

Consumers can pursue the following solutions for debt relief either with the assistance of a professional organization or solo:

DIY Debt Relief

Consumers prepared to manage their own debt repayments may choose the debt snowball or avalanche method. In debt snowball, individuals put the majority of their debt payments toward their smallest debt first to pay it down quickly. After the smallest debt is eliminated, consumers start the process over with the next smallest debt. 

With debt avalanche, consumers pay off their debt with the highest interest rate first to eliminate interest fees faster. Under both plans, individuals continue making only the minimum payment on all other debts to free up more money for the big payoff. 

Qualifications: None

Since consumers manage this method on their own, there are no specific qualifications for using either debt snowball or avalanche to pay off debts. 

Debt Management

Under a debt management plan, consumers share their financial situation with a credit counselor who arranges a payment plan for each debt account. Individuals can enroll unsecured debts like credit cards or medical bills into the plan, paying a lump sum to the debt management organization each month. 

Credit counselors often negotiate reduced interest rates under a debt management plan, helping lower costs for consumers. However, this kind of plan typically takes three to five years to complete. 

Qualifications: Approval from lenders

Credit card companies or other lenders must approve the plan before you can start making payments through the agency. 

Debt Settlement

While you can settle debt independently, many consumers choose to work with a debt settlement company to negotiate with creditors. Using their expertise, these organizations often negotiate a reduced payoff amount that helps consumers clear debt faster for less than their original balance. 

Once you enroll in a debt settlement program, you’ll send monthly payments to the organization until you’ve collected enough to make a lump sum payoff to your lender. Because you stop making payments on your debts, settlement can negatively impact your credit score while you’re enrolled in a plan.

Qualifications: Financial hardship, Minimum debt balance

To enroll in a debt settlement program, most companies require you to prove a financial hardship that prevents you from paying your bills. You’ll also need a minimum debt of at least $7,500 for the majority of debt settlement programs. 

Debt Consolidation

For some consumers, taking out a debt consolidation loan is an effective way to clear outstanding balances. This method uses a bank loan to pay off all current debts, swapping to a single monthly payment to the new lender. 

Consolidating debts through a loan still requires you to make a monthly payment and may extend the amount of time it takes to completely clear your balance. It’s important to secure a loan at a lower interest rate to avoid paying more in interest over the course of the new loan. 

Qualifications: Fair to good credit score; Loan approval

Consumers with good credit scores have a better chance of securing a lower rate to avoid paying more interest. You’ll also need approval from a lender before taking out the loan to pay off all current debts. 

Pros and Cons of Debt Relief

Weighing the benefits and drawbacks of professional debt relief can help you make an informed choice:

Find Out If You Qualify for Debt Relief

If you’re struggling with a heavy load of debt from sources like credit cards or outstanding medical payments, it’s a good time to find out if you qualify for debt relief. Most companies are ready to work with you regardless of your credit score, as long as you can commit to using part of your monthly income toward affordable debt repayments. 

TurboDebt is a trusted partner for debt relief, serving thousands of clients across the U.S. Clients consistently rate TurboDebt’s service and programs high. Over 17,000 five-star reviews prove we’re a trusted partner in relieving debts. 

Contact our team today to start your initial consultation and learn how you can start your journey toward financial freedom.