I had a client once who tried to pay their electric bill with a credit card while eating instant noodles for the fourth meal in a row. But he was really curious if debt relief can help with personal loans. Good question.
Not because they loved sodium bricks in soup form (although, let’s be honest, they do hit the spot in a weird nostalgic way), but because their personal loan payment had cleaned out their checking account… again.
They weren’t out buying yachts or gold-plated toilet seats, either. Most of that loan went toward keeping life together — car repairs, rent, surviving a layoff.
You know, adulting at its finest.
I’ll bet my last peppermint Tums you’ve been there too, or you’re standing dangerously close to it.
So let’s talk about it: Can debt relief actually help with personal loans?
Short Answer? Yes. But Also… It Depends.
Personal loans are like that friend who offers to help you move… and then drops your TV.
They come with good intentions — lower interest than credit cards, predictable payments — but if life throws a curveball (job loss, medical bills, surprise expenses), suddenly that “manageable” monthly payment becomes Everest in flip-flops.
Debt relief can help.
But not all debt relief is created equal — and some options come with more strings than a marionette convention.
Let’s break down the main ones — and then get into the messiest kind of loan: the one from someone you know.
Types of Debt Relief That Can Actually Help
💡 Debt Management Plan (DMP)
This isn’t handing over your life. A reputable nonprofit credit counseling agency helps you:
- Review your debts
- Possibly lower your interest rates
- Bundle everything into one monthly payment
You still pay the full amount — just in a more structured way. Think of it like putting your loan on a treadmill with a personal trainer.
But here’s the catch — credit counseling isn’t always the safe choice.
If it delays your ability to save or invest, it might quietly be stealing from your retirement.
📉 In fact, going the long, slow road with credit counseling instead of considering something like bankruptcy could cost you over $400,000 in lost retirement savings. Here’s the math behind that.
So ask yourself: Is this plan helping me survive the moment, or costing me my future?
⚠️ Debt Settlement
You negotiate to pay less than you owe. Sounds great in theory.
But here’s what they don’t advertise:
- Your credit takes a serious hit
- You might owe taxes on the forgiven debt
- Not all lenders play ball
If someone promises miracles? Walk away. Fast.
🚪 Bankruptcy
It’s not a dirty word. Sometimes it’s the smartest, most honest option.
If your financial life feels like a game of whack-a-mole, bankruptcy might just be your reset button:
- Chapter 7 can wipe out unsecured personal loans entirely
- Chapter 13 lets you reorganize and pay what you can over time
Important note: People who file bankruptcy often do better financially than those who don’t. Source
But What If Your Personal Loan Is From a Friend or Family Member?
Oh boy. Now we’re in emotional quicksand.
If you borrowed money from your cousin, your coworker, your ex, or your mom?
That’s not just a loan. That’s a potential relationship time-bomb.
Why? Because:
- Expectations are often unspoken
- Boundaries are unclear
- And guilt? Shame? Resentment? That’s a triple-decker sandwich with no sides
Here’s my personal rule:
If I ever lend money to someone I care about, I assume I might never get it back.
I ask them to repay it — but I don’t let it wreck my peace if they don’t.
So if you borrowed from a friend or family member, talk to them.
Ask them where they stand. You might find more grace than you expect — or at least some clarity.
🛠️ So What Can You Do?
- Be honest. Don’t ghost them.
- Put something in writing. Even a simple agreement builds trust.
- Consider mediation. Especially if big money is involved and the relationship matters. It’s worth a try.
Sometimes, the smartest form of “debt relief” isn’t financial — it’s emotional honesty.
The Chart-Topping Hit: Reality-Based Planning
Forget budgeting like some internet guru who’s never cried in a parking lot.
Let’s do this instead:
- Track every dollar you spend for one month. Seriously, all of it.
- Look at the truth. Not what you think you spend — what’s actually happening.
- Build a plan based on real life. Not fantasy.
If cutting Netflix saves you from overdrafts? That’s a win.
If it lets you pay your friend back on time? Even better.
Apps like Acorns can help you build a savings buffer by rounding up purchases — no stress, no pressure.
But Will My Lender Let Me Off the Hook?
Nope. Most lenders want you to pay until the sun explodes.
BUT — they might help if you ask. Call them. Be honest. Ask about:
- Hardship plans
- Payment pauses
- Temporary interest reductions
Most companies prefer a conversation over a collections call.
FAQ
Can I include a personal loan in a debt management plan?
Sometimes — depends on the lender. A credit counseling agency can tell you who plays nice.
Will debt settlement hurt my credit?
Absolutely. But if you’re already missing payments, it might not matter much in the short term.
Is bankruptcy the worst-case scenario?
Nope. Sometimes it’s the smartest. Bankruptcy exists for a reason.
What if I owe a friend or family member?
You won’t find their name on a DMP. But you can talk to them, get on the same page, and come up with a plan.
The Bottom Line About Whether Debt Relief Can Help With Personal Loans
Personal loans start as lifelines…
But they can become cinder blocks tied to your feet.
Whether you owe a bank or your Aunt Judy — the pressure is real.
Debt relief can help. But it has to be the right kind.
Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.
And sometimes, the most powerful move is admitting: “I can’t do this alone anymore.”
So don’t.
You’re not weak. You’re not bad with money. You’re just human.
Want Some Backup?
If this post helped at all — or gave you a laugh between sighs — subscribe to the Get Out of Debt newsletter or listen to the podcast.
We’ll gripe, we’ll joke, and we’ll figure it out together.
💬 Before You Go…
If this is already hitting home for you, boop that like button to give it some love.
It helps more people find this message.
And if you want a trusted expert to walk you through your options, talk to Damon Day — the only debt coach I trust.
Drop a comment below:
Have you ever borrowed or lent money to someone close? How did it go? Let’s talk.
