1. Debt Consolidation Loan

What it is: A debt consolidation loan is a new personal loan you take out to pay off multiple debts (like credit cards) at once. Ideally, it has a lower interest rate than your existing debts, helping you save money and simplify into one monthly payment.

Best for:

✅ People with good-to-excellent credit (usually 670+).

✅ People who have stable income and can qualify for a lower interest loan.

✅ People who are current on their payments and want to help their credit utilization and convert compounding interest to simple fixed.

Common Goals:
-Fixing credit utilization

-Converting Compounding Interest to simple fixed

-Single monthly payment

-Paying off debt faster with less total interest

2. Consumer Credit Counseling

What it is: A nonprofit credit counseling agency helps you combine your unsecured debts (like credit cards) into one program. They negotiate with creditors to lower your interest rates and set up a structured monthly payment plan (without a new loan).

Common Goals:
-Reduce interest rates dramatically

-Simplify payments

-Pay off debt in 3–5 years while avoiding settlement or bankruptcy

Best for:

✅ People with $5,000–$15,000+ in credit card debt but can be more.

✅ People with steady income who can afford a fixed monthly payment, but need relief from high interest rates.

✅ People who might not qualify for a low rate loan but still want to save money on interest without falling behind.

3. Debt Settlement

What it is: Debt settlement involves negotiating directly with your creditors (or using a company) to pay less than the total you owe. You stop paying creditors directly and save money in a special account while settlements are negotiated.

Best for:

✅ People with $10,000+ in unsecured debt who are behind on payments (or about to fall behind).

✅ People experiencing financial hardship (like job loss, medical bills, divorce).

✅ People who cannot realistically pay their full balances even with lower interest rates.

Common Goals:
-Reduce total debt balances

-Avoid bankruptcy

-Settle debts faster than paying in full — often within 2–4 years

4. Bankruptcy (Chapter 7 or Chapter 13)

What it is: Bankruptcy is a legal process that can either eliminate (Chapter 7) or restructure (Chapter 13) most of your debts. It is a formal court procedure, and protections go into effect immediately to stop collections and lawsuits.

Best for:

✅ People who cannot realistically pay their debts back, even with settlement or counseling.

✅ People facing lawsuits, wage garnishment, or overwhelming financial hardship.

✅ People with very high debt compared to income and few realistic options left.

Common Goals:
-Legally eliminate or restructure debts

-Stop collection actions

-Get a fresh start financially (with long-term credit rebuilding afterward)

5. Self-Resolution ("DIY Payoff")

What it is: In some cases, based on income, debt amount, and payment ability, it may be better for a consumer to manage their debt payoff directly. This means budgeting carefully, negotiating lower interest rates themselves, or using a strategic payoff method (like avalanche or snowball).

Best for:

✅ People with lower debt balances (typically under $5,000).

✅ People who have the ability to make aggressive monthly payments.

✅ People who prefer to avoid programs, loans, or legal options.

Common Goals:
-Save money on fees

-Build personal financial discipline

-Pay off debts independently without third-party involvement