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Does debt consolidation or debt forgiveness make more sense with bad credit?
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With credit card rates now averaging above 23%, millions of Americans are struggling with their credit card debt. As the interest charges compound, it’s easy for this type of debt to grow out of control, especially given today’s rates. But effectively managing any type of debt — and credit card debt, in particular — can be especially challenging when paired with a poor credit score.
A low credit score can severely limit your borrowing options, as borrowers with damaged credit are considered risky to lenders. This means that certain debt relief strategies, like using a balance transfer card to temporarily wipe out interest charges, can be out of reach. As a result, figuring out how to address your credit card debt when your credit score is low can feel like an impossible task.
Many people in this situation consider debt consolidation or debt forgiveness as potential solutions. While both strategies aim to alleviate debt burdens, they work quite differently. With debt consolidation, the goal is to roll multiple debts into one loan with a lower interest rate. With debt forgiveness, the goal is to get your creditors to agree to a lower lump-sum settlement to reduce the amount you owe. Both can provide serious relief from high-rate card debt, but which one makes more sense for those facing this type of situation?
Compare the credit card debt relief options available to you here.
Does debt consolidation or debt forgiveness make more sense with bad credit?
When dealing with bad credit, debt forgiveness often emerges as the more accessible option compared to debt consolidation. That’s because traditional debt consolidation loans are acquired from banks, credit unions or other types of lenders and typically require a decent credit score to qualify for a new loan with favorable terms. If you have bad credit, debt consolidation loans tend to come with high interest rates that might not provide meaningful relief from existing debt burdens — and in certain cases, you may not be approved at all.
On the other hand, debt forgiveness programs, which are offered by debt relief companies, don’t typically require good credit scores to be eligible. These programs focus more on factors like the total debt amount you have, the types of debt you need to settle and your ability to make consistent monthly payments toward a settlement fund. While debt forgiveness can further damage your credit by requiring you to stop making payments to your creditors, this process might offer a faster path to financial recovery, especially if you’re already struggling with poor credit.
However, debt consolidation shouldn’t be completely ruled out if you have bad credit. There are several options for those with lower credit scores, including:
- Debt consolidation programs offered by debt relief companies, which typically have more flexible lending requirements
- Secured debt consolidation loans that use collateral to lower the risk for lenders
- Home equity loans (for homeowners), which can be more accessible since they’re secured by the equity in your home
- Debt management plans through credit counseling agencies, which can consolidate your monthly payments while lowering your interest rates or fees
So, if you’d prefer to avoid damaging your credit further by enrolling in a debt forgiveness program, it can still make sense to look into these alternative debt consolidation routes. You may find that one or the other works with your current credit score and financial situation.
Tackle your expensive credit card debt today.
How to decide on the right debt relief option
When deciding between debt consolidation and debt forgiveness, it’s important to start by considering your financial stability, goals and current income. If you have a stable income but struggle with high-interest debts, debt consolidation might be more feasible and beneficial in the long term. Securing a debt consolidation loan with a lower interest rate can make monthly payments more manageable, even if your credit score isn’t ideal. If you’re not eligible for a traditional loan, there are debt consolidation programs that might work with you to secure a loan despite poor credit.
If your debts are so overwhelming that debt consolidation is out of reach, debt forgiveness may be a better option. This is often the case for people experiencing a financial crisis, such as a sudden job loss, major health expenses or other unforeseen circumstances. Debt forgiveness programs can reduce the total amount you owe by 30% to 50% on average, which can be a big relief for those who simply can no longer afford to pay off their balance in full.
It’s also worth weighing the long-term impact on your credit score when choosing between these options. Debt consolidation, if managed well, can potentially boost your credit score over time by reducing your credit utilization ratio and demonstrating a commitment to repaying debt. In contrast, debt forgiveness can lead to a temporary drop in credit, as settled debts are typically reported to credit bureaus and you may be required to miss payments during the negotiation process.
The bottom line
Deciding between debt consolidation and debt forgiveness is a highly personal choice and should be based on your unique financial situation and goals. With bad credit, each option has challenges, but they also offer distinct forms of relief. Debt consolidation may be suitable if you’re capable of managing a single monthly payment at a lower interest rate, providing an opportunity to rebuild your credit over time. Debt forgiveness, while offering immediate debt relief, may be more appropriate if your financial circumstances make consistent repayment impossible.
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Want to live an extra 5 years? Those over 40 should exercise like this every day, researchers say
Exercising like the most active 25% of Americans can help those over 40 add an extra 5 years to their life on average, according to new research.
In the study, published Thursday in the British Journal of Sports Medicine, researchers created a predictive model to estimate the impact of different levels of physical activity on life expectancy using data about people who were at least 40 years old from the National Health and Nutritional Examination Survey and other sources.
Though it was an observational study, which doesn’t prove cause and effect, the findings suggest increased focus on physical activity can potentially pay off in terms of Americans’ lifespans.
“Our findings suggest that (physical activity) provides substantially larger health benefits than previously thought, which is due to the use of more precise means of measuring (it),” the authors wrote.
So how much do you have to exercise to gain the potential benefits? The total physical activity of the most active 25% of Americans was equivalent to 160 minutes of walking at a normal pace, or about 3 miles per hour, every day, according to the study.
If all Americans over 40 matched this level of activity, life expectancy at birth would bump from 78.6 years to nearly 84 years, about a 5-year increase in average lifespan.
If the least active Americans committed to an extra 111 minutes of walking daily, the effects were even more dramatic, the estimates indicate — adding almost 11 years to the average lifespan.
This isn’t the first time research has highlighted the health benefits of walking.
A study last year from the same journal found walking just 11 minutes per day could significantly lower the risk of stroke, heart disease and some cancers.
Other viral fitness trends like the “hot girl walk” and “fart walk” have also encouraged Americans to get their walking shoes on for a number of physical and mental health positives.
The U.S. Postal Service on Thursday said its annual loss widened to almost $10 billion, although revenue rose slightly after two postage rate hikes this year, part of Postmaster Louis DeJoy’s plan to get the postal agency on a better financial footing.
The USPS said it lost $9.5 billion in the fiscal year ended September 30, compared with a loss of $6.5 billion a year earlier. The postal service blamed the wider loss on billions spent on noncash contributions to worker compensation.
Excluding that expense as well as what it described as other “certain expenses that are not controllable by management,” the USPS said it would have lost $1.8 billion in fiscal 2024, compared with a loss of more than $2.2 billion a year earlier. Revenue rose 1.7% to $79.5 billion in the most recent fiscal year.
The USPS is in the midst of a 10-year overhaul engineered by DeJoy, who has argued that higher postal rates and other changes are essential to staunch the postal service’s financial bleeding. Under his original plan, the USPS had aimed to turn a profit in fiscal 2024, but instead, the agency has now reported mounting losses for two consecutive years, raising questions about the effectiveness of the turnaround effort.
DeJoy said the agency is focused on reducing its costs, but that it is also dealing with “many economic, legislative and regulatory obstacles for us to overcome.”
The USPS has raised postage rates twice in 2024, with a two-cent per stamp increase in January and a second boost in July, which raised the cost of a Forever stamp to 73 cents.
Fewer deliveries
Mail volume declined in the most recent fiscal year, although revenue increased due to the higher postage rates, the USPS said. It delivered 112 billion pieces of mail, magazines, packages and other items last year, a decline of 3.2% from the prior fiscal year, it said in a financial report.
Keep US Posted, an advocacy group of newspapers, magazines and other companies that rely on the USPS, described the agency’s $9.5 billion loss as “staggering,” and said it was $3 billion higher than expected. The group also blamed the rate hikes for driving customers away from the USPS, reducing mail volume.
“The bottom line is that these consistent financial losses are driven by stamp hikes which lead to disastrous mail volume losses, plus the complete failure of USPS to capture parcel market share in already crowded package delivery space,” said Keep US Posted executive director Kevin Yoder in a statement.
Yoder, a former Republican Congressman from Kansas, also criticized the USPS for focusing on packages rather than traditional mail delivery, which he said remains the largest revenue generator for the postal service.
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Want to live an extra 5 years? Those over 40 should exercise like this every day, researchers say
Vandals uproot 60 new trees on St. Paul riverfront tossing many in the Mississippi River