Debt Relief Options: Cash-Out Refinance, Consolidation & More
Compare every debt relief strategy — from cash-out mortgage refinancing and HELOCs to debt consolidation loans and balance transfers. Find the best option for your situation.
Explore All Your Options
Each option has different requirements, timelines, and trade-offs. Understanding them all helps you make the right choice.
Debt Consolidation Loans
Combine multiple debts into one loan with a single monthly payment, ideally at a lower interest rate than your current debts.
Best For: People with multiple high-interest debts and a decent credit score
- Fixed interest rates with predictable monthly payments
- Loan terms typically span a few years
- Can reduce interest compared to credit cards if you qualify for a lower rate
- Available from banks, credit unions, and online lenders
- May include origination fees, so compare total costs
Mortgage Refinancing
Replace your current mortgage with a new one at better terms. This can lower your monthly payment, reduce your interest rate, or allow you to access home equity.
Best For: Homeowners who can qualify for a rate at least 0.5-0.75% lower than their current mortgage
- Rate-and-term refinance: Lower your rate or change your loan term
- Cash-out refinance: Access home equity to pay off high-interest debt
- Closing costs apply, so factor them into your decision
- Plan to stay in your home long enough to recoup closing costs
- Can potentially lower your monthly mortgage payment
Debt Management Plans (DMP)
Work with a nonprofit credit counseling agency to negotiate lower interest rates and create a structured repayment plan for unsecured debts.
Best For: People struggling to make minimum payments on credit cards and unsecured loans
- Nonprofit credit counselors negotiate with creditors on your behalf
- Interest rates may be reduced as part of the plan
- One monthly payment to the counseling agency, distributed to creditors
- Plans typically last 3-5 years
- May require closing credit card accounts during the program
Debt Settlement
Negotiate with creditors to accept a lump-sum payment that's less than the full amount owed. This is a more aggressive approach with significant credit implications.
Best For: People with significant debt who are already behind on payments and considering bankruptcy
- Settlements are often for less than the full balance, but there is no guarantee
- Significant negative impact on credit score
- Forgiven debt may be considered taxable income
- Creditors are not required to negotiate or accept settlements
- For-profit settlement companies typically charge fees based on enrolled debt
Home Equity Line of Credit (HELOC)
Borrow against the equity in your home at much lower interest rates than credit cards. Functions like a credit card secured by your property.
Best For: Homeowners with significant equity who need flexible access to funds for debt payoff
- Interest rates are typically much lower than credit cards
- Revolving credit line, so you borrow only what you need
- Interest may be tax-deductible if used for home improvements (consult a tax advisor)
- Your home is collateral, so there is a risk of foreclosure if you can't repay
- Variable interest rates can increase over time
Bankruptcy (Last Resort)
A legal process that can discharge certain debts or create a structured repayment plan. Should only be considered after exhausting all other options.
Best For: People with overwhelming debt and no realistic ability to repay within 5 years
- Chapter 7: Liquidation — most unsecured debts discharged in 3-4 months
- Chapter 13: Reorganization — 3-5 year repayment plan based on income
- Stays on credit report for 7-10 years
- Student loans, taxes, and child support generally cannot be discharged
- Automatic stay immediately stops creditor harassment and wage garnishment
Balance Transfer Cards
Transfer high-interest credit card balances to a new card with a 0% introductory APR period, giving you time to pay down principal without interest.
Best For: People with good credit and credit card debt they can pay off during the promotional period
- Introductory low or zero percent APR periods are time-limited
- A balance transfer fee usually applies to the transferred amount
- Requires good to excellent credit to qualify
- After the promo period, the standard APR applies to any remaining balance
- The credit limit on the new card may not cover all existing balances
Credit Counseling
Work with a certified counselor to review your finances, create a budget, and develop a personalized action plan for managing debt.
Best For: Anyone who wants professional guidance on managing debt and improving finances
- Many nonprofit agencies offer free initial consultations
- Counselors can negotiate with creditors and set up DMPs
- Helps you understand your full financial picture and options
- Look for agencies certified by NFCC or FCAA
- Beware of for-profit companies disguised as counseling services
Side-by-Side Comparison
Quickly compare the key factors of each debt solution to find the right fit.
| Option | Credit Impact | Timeframe | Cost |
|---|---|---|---|
| Debt Consolidation | Minimal | 2-7 years | Low-Medium |
| Mortgage Refinancing | Minimal | 15-30 years | Medium |
| Debt Management Plan | Low | 3-5 years | Low |
| Debt Settlement | Severe | 2-4 years | Medium-High |
| Balance Transfer | Minimal | 12-21 months | Low |
| Bankruptcy | Severe | 3 months-5 years | Medium |
Homeowner? Your Equity Changes Everything
If you own a home with equity, you have access to debt consolidation options that non-homeowners simply don't. Learn the full breakdown in our complete HELOC vs home equity loan guide, or explore whether a cash-out refinance to pay off debt makes sense for your situation.