Cheapest Way To Get Out Of Debt Of 2022

If you are in debt that you can’t pay or your bills are extremely due, you will need ways to get out of debt, a cheap one at that. There are many options to look for, like debt settlement.

The American Fair Credit Council (AFCC), a group of industry debt settlement businesses committed to a stringent code of conduct, can suggest debt settlement as the cheapest way.

According to a 2020 report, debt settlement has an average of $2.65 consumer saving for every dollar in the costs, and virtually all offer settlements got a reduction of the client’s debt that was more than the fees associated with the debt.

Let’s take a look at whether debt settlement is the cheapest way to get out of debt.

Cheapest Way To Get Out Of Debt

Key Takeaways

  • Debt settlement offers can range from 10%-50% of what you owe, and the fees might range from 20%-25%.
  • Debt settlement can negatively impact your credit score.
  • Your debt settlement record stays on your credit report for seven years.
  • Chapter 7 bankruptcy can be completed in three to six months, and it also stays in your credit report for 10 years.

Debt Settlement

The Debt settlement is a method of cleaning your debt by settling with the other party for a fraction of the original amount of your debt by guaranteeing the lender a big payment.

The process is also known as “debt relief” or “debt adjustment. Depending on your circumstances, debt settlement offers might range from 10% to 50% of what you owe. After then, the creditor must choose which offer to accept.

Consumers may either settle their debts themselves or pay a top debt settlement company to do it for them.

In the latter situation, you have to pay a certain commission of a percentage of your enrolled debt for their fee to the business.

When you enroll in the program, the debt you have at that moment is your enrolled debt.

The firm can not impose this fee until your debts are resolved. Fees are between 20% to 25% on average.

Read: Difference Between Debt Settlement And Debt Consolidation


Those who go for debt settlement programs because they were not able to pay their financial burden but still have continuous payments don’t have enough bargaining strength when compared to those who couldn’t make any payments.

Because of this, they stop all payments immediately. Delinquent debt and accepting to settle for less than you owe can significantly influence your credit score negatively, and if it goes to the mid-500s, this is a bad credit score.

The bigger decline you have equals to high score before you fall behind.

Payments you make after the due date can stay on your credit report for a maximum of seven years.

The more you don’t pay, the more late penalties and interest you will have and increase your balance and make it harder to pay off the entire debt in the case you don’t get a settlement deal.

Once consumers become late, they might expect intrusive debt collection phone calls.

Creditors may also sue customers for debts over $5,000—debts that are worth their time, in other words—resulting in wage garnishment.

Read: Golden Financial Services Reviews

Credit Counselling

Nonprofits and government entities offer credit counseling for a very low price or without taking any fee.

The surprising thing is that most credit companies occasionally support credit counseling services in part.

You may have the right to get a lower interest rate and the right to waive any penalty fees if you choose to work with a debt management plan with a credit counseling service.

This kind of incentive could help you to pay off your debt quicker, and it might allow you to afford the increased monthly payments.

In addition, you still have the chance to not get any decrease in your interest rate if you have considerable financial difficulty.

Your credit score may suffer less as a result of not having to default on your obligation.

Declaring Bankruptcy

Debt settlement may benefit everyone if people involved do it correctly. It helps people to get rid of debt that they cannot pay and save extra money.

The debt settlement companies that are working to help people make their debt settled make money with an extremely important service, and creditors get more money than they would or at least get some amount of money if the consumer stopped paying or filed for bankruptcy under Chapter 7.

Under Chapter 7 bankruptcy, the non-exempt assets of the debtor get liquidated, and the profits go to repay the creditors.

The things that differ by the state might include your personal or household belongings, a part of home equity, your funds for retirement, or a car.

In comparison to debt settlement, you can complete Chapter 7 bankruptcy in three to six months.

The bankruptcy process will be on your credit report for ten years, but it might not have as much stress and help your credit score to get better faster.


For many people, using debt settlement is generally the cheapest way to get out of the deep debt they are in.

However, it is important to note that this mostly depends on the amount you owe and how much stress you are willing to take when you compare it to other alternatives.

You have to understand all the benefits and drawbacks before you go down the debt settlement route. The best strategy is to look into all three possibilities.



Can you repair your credit score after using the cheapest way to get out of debt?

You can, but it takes a while. However, it is worth mentioning that your credit score does not get affected as much as declaring bankruptcy.

Declaring bankruptcy is the most dangerous one for your credit score, and then comes debt settlement.

There might be some different things that could be beneficial to look for, but legally there isn’t much to choose from.

Credit counseling is another way of going, but that is definitely not a sure way to settle your debt since it is just counseling, and if you end up working with the wrong company, it could affect the outcome of the counseling.

How hard is it to find the cheapest way to get out of debt?

There are many ways to find ways to get out of debt, from bankruptcy to credit counseling, but many people prefer using debt settlement as that way is seen as the best way to get rid of your debt without ruining your financial profile in a really bad way.

It takes time to research and find out all the possibilities to get out of debt but looking back to other examples in the past; debt settlement seems like the best and cheapest way to get out of any outstanding debt.

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