Debt resolution, consolidation, or paying the minimum
There are three realistic ways out of unsecured debt and they cost you very different things. We only provide one of them, so we have tried to describe the other two the way we would want ours described.
Choosing 5 min read
Worth keeping in mind while you read this: we sell one of the three. We have tried to be fair about the other two anyway, partly because the wrong choice here is expensive and you are the one who ends up paying for it.
Paying the minimum
This is the default, and for plenty of people it is the right answer. Nothing changes, your accounts stay current and your credit report stays clean. What it costs you is time and interest, and both tend to be larger than people expect, because a credit card minimum is not a fixed amount. It is usually around 1% of the balance plus that month's interest, so it shrinks as the balance shrinks. The payment gets smaller, the payoff date gets further away, and the interest carries on compounding the whole time.
That is why a balance you are handling at $400 a month can take decades rather than years. Put your own numbers into the calculator and look at the total interest rather than the monthly payment, because the total is what this path actually costs you.
This is the right choice if the balance is small enough, or your income high enough, that you can clear it within a reasonable stretch of time, and especially if you can pay more than the minimum. If that describes you, do this. It is the cheapest option available and it costs your credit nothing.
A consolidation loan
You borrow once at a lower rate and use it to pay off the cards. The debt does not get smaller, it moves somewhere cheaper. You end up with one payment, a fixed end date, and cards reported as paid in full, so your credit comes through largely intact.
The catch is that it is a loan, so you have to qualify for one. That means credit good enough to get you a rate meaningfully below what the cards are charging. The people who most need the relief are often the ones whose credit has already slipped far enough that the rate on offer is not much better than what they are already paying.
The second catch is about behavior rather than arithmetic, and it is the common way this goes wrong. The cards are empty now, and the loan sits alongside them. If nothing has changed about why the balances built up in the first place, a year later there is a consolidation loan and card balances again.
This is the right choice if your credit still gets you a genuinely lower rate, your income covers the payment comfortably, and you trust yourself to leave the cards at zero.
We do not originate loans and we earn nothing if you take one. It is here because for some people it is plainly the better answer.
Debt resolution
Negotiating with your creditors so they accept less than the full balance. It only applies to unsecured debt, and it is what is left to consider once the first two options have stopped being realistic, which usually means the balance is not moving and a loan is not available at a rate that would help.
What it costs you is your credit and a stretch of genuine difficulty. Payments to enrolled creditors stop, the accounts go delinquent, collection activity increases and creditors keep the right to sue you. Fees are a percentage of what you enroll and cannot legally be charged until a debt has actually been settled. Not everyone finishes, and stopping partway through leaves the accounts in worse shape than they started.
Whoever you end up speaking to, it is worth reading how to tell whether a debt relief company is worth trusting first. It covers the federal rule on advance fees and the questions worth asking on the call.
We have written the month by month version of this in what actually happens when you enroll in a program, including the parts people find hardest.
This is worth a conversation if the debt is unsecured and substantial, there is no realistic way to clear it on the current terms, a consolidation loan is not available at a useful rate, and you can keep up a deposit for a few years.
The option we cannot advise on
Bankruptcy exists, and for some people it is the right answer. It is a legal process with consequences and protections that a debt resolution company is not qualified to explain to you. We are not a law firm. If you think it might apply to your situation, talk to a bankruptcy attorney before anything else. Many will do an initial consultation at no cost, and it is worth having that conversation before you commit to any of the above.
| Paying the minimum | Consolidation loan | Debt resolution | |
|---|---|---|---|
| What it costs | Interest, over years | Interest, at a lower rate | Your credit, plus a fee on each debt settled |
| What it requires | Nothing new | Credit good enough to qualify | A deposit you can sustain for years |
| Effect on credit | None, if you stay current | Little, if the loan is paid | Significant and lasting |
| Balance owed | Paid in full | Paid in full, moved | May be settled for less |
| Main risk | Never getting ahead of it | Refilling the cards | Not completing; creditors may sue |
How to choose
Work down the list. If you can clear the balance yourself within a reasonable time, do that. If you can get a consolidation loan at a rate that genuinely helps and you trust yourself not to fill the cards back up, do that. If neither is true and the debt is unsecured and substantial, resolution is worth a conversation. If bankruptcy has crossed your mind, see an attorney before you decide anything else.
Whichever way you go, do the arithmetic first. People usually end up on the expensive path because nobody sat down and added it up.
Shores Financial LLC provides debt resolution services for unsecured debt. We are not a law firm, a credit repair organization, or a lender, and we do not provide legal, tax, credit repair, or bankruptcy advice. We do not originate loans. Results vary based on individual circumstances, creditor participation, and your ability to complete a program; not all clients complete their program, and we cannot guarantee that any particular debt will be reduced by any specific amount or percentage. Using a debt resolution service may adversely affect your credit score and may result in collection activity or legal action by creditors. Services are not available in all states.
