What Is Debt Restructuring and Should I Consider It?

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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debt repayment strategies

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Whether it’s student loans, car payments, consumer debt or a combination, multiple bills each month can make it hard to feel like you’ll ever pay down debt — let alone get ahead financially.

Even if you make a commitment to pay bills each month, you may find that a chunk of your money goes toward interest. Meanwhile, you may have new expenses emerging, leaving you feeling stuck. If this sounds like your life, you may find debt restructuring to be a potential option to help pay down bills and pave the way toward a debt-free future.

How to approach debt restructuring

Debt restructuring is a catchall term to describe various methods of paying down debt. Many people hear “debt restructuring,” assume it’s a euphemism for bankruptcy, and think it might not be the right option for their situation. While bankruptcy is a potential avenue toward restructuring your debt, it’s not the only one, and may not be the best option for your situation.

Before you look at various avenues toward debt restructuring, it’s important to consider:

  • How much you owe
  • Which lenders you owe to
  • How you got into the debt in the first place

You may have one bank account-crushing bill from a medical emergency a few years ago. Maybe student loans are weighing you down. Or maybe it’s consumer debt that crept up during a few years of living beyond your means. Not only can knowing how your debt occurred give you insight into future money decisions, but it may be possible to use this information to help you decide on your best debt restructuring strategy. For example, if your debt was due to a one-time expense, like a medical emergency, it may make the most sense to negotiate with your lender, and see if it’s possible to come to an agreement on the remainder of debt owed.

Here are some debt restructuring tactics to consider.

Negotiate with your lender

You’re barely paying down the interest on bills, and find your finances stretched thin enough to break. It may be a good time to speak with your lender regarding the terms of your loan. Why? Because a lender wants their money back, and would much rather negotiate for a guaranteed payment than have the debt go unpaid.

This type of negotiation depends on the type of loan, and depends on your unique circumstances. If you’ve already defaulted on the loan, and it’s in collections, it may be possible to negotiate with the lender to see what terms are possible. It also may be possible to negotiate interest rates.

Do you pay your bills on time every month? Are you a good customer? Then, it may be possible for the lender to lower interest rates, allowing you to pay more on the principal owed each month. Interest negotiation depends on the type of loan. For example, federal student loans, whose interest is set by Congress, cannot be negotiated.

When to consider negotiating with your lender: It’s worth researching whether or not your lender would be willing to negotiate. Speaking to them and being upfront about your situation — whether you’re struggling with payments or have been on-time from the start — may make your lender more willing to negotiate. However, don’t be discouraged if this option doesn’t pan out; you have other tactics to consider.

Debt consolidation

Debt consolidation via a personal loan may help lower interest rates, simplify payments, and allow you to pay a single bill instead of multiple bills each month, which can minimize the chances of a missed payment damaging your credit. You’ll still have to pay back your debt, but your lender is now the loan company, rather than your original lender.

It’s worth noting that with debt consolidation, you can choose a shorter or longer repayment term. A shorter term will increase your monthly payments, but get you out of debt sooner; a longer term will keep you in debt longer, but with lower monthly payments.

Loan offers are based on factors including the amount required, your credit history, and your credit score. But you may also have the option of getting a co-signer, like your parents, to potentially get more attractive offers.

When to consider debt consolidation: Debt consolidation may be an option if you’re overwhelmed with your bills — both the number of bills each month and the amount you have to pay. It’s important to understand how the debt occurred, too. For example, you may have taken out private student loans or relied too heavily on credit cards during your first years out of school.

Be aware that the best personal loan rates are reserved for borrowers with higher credit scores and, potentially, higher incomes. And personal loans can come with fees, such as an origination fee or prepayment penalty. You can explore bad-credit personal loans if your credit score is less-than-perfect. But keep an eye on loan rates if you’re trying to make repayment cheaper.

Debt refinancing

Often occurring hand in hand with debt consolidation, debt refinancing is a way to potentially lower your interest rates, decrease monthly payments, or both on certain types of loans. While a personal loan can cover a wide range of debts, refinancing can be a great tool for specific debt, like student loan payments. For example, if you have private and federal student loans, refinancing your student loans can allow you to pay a single bill instead of multiple bills.

When to consider debt refinancing: Refinancing debt, especially when it comes to refinancing student loan debt, comes with a few major considerations. One of the largest ones is that refinancing with a private lender pays off federal student loans and replaces them with a private loan. Federal student loans come with borrower protections and repayment options, such as alternative repayment plans, that can’t be accessed with a private loan. Knowing what you’re gaining — possibly a lower interest rate or lower payments — can help you decide if it’s worth what you may be giving up.

A loan from a family member

If you’re struggling with your bills, it may make sense to turn to your family for a loan, if they’re in a position to help you. Of course, when you agree to borrow money from a family member, it’s important to lay out terms, including interest rates and a repayment plan, and it may be helpful to have a neutral party, like a loan mediator, help hammer out loan specifics.

When to consider a personal loan from a family member: You know your family, and you know if someone is in the position to potentially loan you money — and still have a future of stress-free Thanksgivings. If you feel someone is willing to give a loan, making sure you’re both happy with the specifics of the repayment plan, as well as discussing what-if possibilities (what if you lose your job, what if they can no longer pay you what you need) can make sure you’re both on the same page.

Balance transfer to an introductory zero-interest credit card

If you have consumer debt, are no longer charging purchases on cards, and are committed to paying off your debt, looking at potential zero-interest promotional offers on credit cards may make sense.

Just remember: These promotions generally expire after a certain number of months, at which time an interest rate will be applied. If you’re confident you can pay off that transferred balance in a set amount of time and have excellent credit, it may make sense to consider transferring the balance on your current cards, which could save you money on interest and allow you to pay down the principal of the debt owed.

When to consider a balance transfer: A balance transfer may be a good option if you have consumer debt alongside excellent credit, a plan to pay off your debt, and aren’t actively charging expenses on a card at this point in your life. A balance transfer may make sense for consumer debt you consider manageable, but feel you could pay faster if you weren’t mired down by interest.


Often a last resort, there are times when you’re so overwhelmed with bills that bankruptcy may seem to make the most sense for your financial future. It’s important to know what bankruptcy is, and how it may affect both the debt you have. For example, it can be hard for student loan debts to be discharged in certain bankruptcy filings.

Bankruptcy will likely affect your credit, remaining on your credit report for up to 10 years. Speaking with a credit counselor or student loan counselor (you may be able to find one for free or at a low-cost) can help you figure out if this is the right path for you.

When to consider bankruptcy: If you’ve exhausted other options and feel overwhelmed by debt, bankruptcy may be necessary. Of course, speaking with a counselor or bankruptcy lawyer can help you understand what bankruptcy means, how it affects your financial future, and how to move on. It’s also important to know whether your debt is eligible to be discharged via bankruptcy, as some debts, like federal student loans, may not be.

Choosing a debt refinancing strategy

There’s no right option for all, and it may be that a combination of methods is the right choice for you, based on your unique financial needs. Before you choose a strategy, understand how much debt you owe, and understand that you have options. Feeling in control of your financial choices is a good first step in feeling in control of your finances. Hearing what others have done, researching various methods online, and potentially speaking to a financial counselor or student loan counselor can help you confidently decide on the best method of debt restructuring for you.

Interested in a personal loan?

Here are the top personal loan lenders of 2019!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.990% APR to 16.990% APR (with AutoPay). Variable rates from 5.74% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of March 18, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.72% APR assumes current 1-month LIBOR rate of 2.49% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 5.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.79% – 20.89% (6.79% – 20.89% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 9.99% APR to a high of 35.99% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.

†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com

**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.

7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

5.74% – 16.99%1$5,000 - $100,000

Visit SoFi

7.54% – 35.99%$1,000 - $50,000

Visit Upstart

7.99% – 35.89%*$1,000 - $50,000

Visit Upgrade

5.99% – 24.99%2$5,000 - $35,000

Visit Payoff

5.99% – 29.99%3$7,500 - $40,000

Visit FreedomPlus

6.79% – 20.89%4$5,000 - $50,000

Visit Citizens

9.99% – 35.99%5$2,000 - $25,000

Visit LendingPoint

6.95% – 35.89%6$1,000 - $40,000

Visit LendingClub

6.99% – 18.24%7$5,000 - $75,000

Visit Earnest

9.95% – 35.99%8$2,000 - $35,000

Visit Avant

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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