Best Debt Relief Companies

Compare top debt relief companies

Buyers guide to debt relief

Debt is any borrowed money from a lender, usually with added interest. If you have unsecured debt, you’re struggling to make your monthly payments or you can’t figure out how you’ll even be able to repay the principal balance, you might be interested in a debt relief program.

Debt relief programs help you manage or reduce what you owe through options like debt settlement, debt management plans (DMPs) or creditor negotiations. However, it’s important to remember that it could still take two to five years to get your debt under control, and some debt relief options could harm your credit.

If you’re considering using a debt relief program, make sure you find one that offers a free consultation before offering services. You’ll also want to look for a company that is a member of at least one reputable trade organization and doesn’t have any recent legal actions against it.

What is a debt relief company?

A debt relief company is designed to help consumers resolve their debt. This could involve creating a DMP to pay off the full amount or negotiating with your lender to settle for less than you owe. As a last resort, the company might suggest that you file for bankruptcy.

Debt relief companies can typically help with unsecured debt like:

• Credit cards
• Personal loans
• Private student loans
• Deficiency balances on prior repossessions (e.g., the remaining balance on an auto loan after the car was sold at auction)
• Medical bills
• Other past due bills turned over to collections

You usually won’t be able to get help from a debt relief company for issues with secured debt (e.g., mortgages, auto loans) or federal student loans. These creditors are often unwilling to work with debt relief companies, so you’re better off working directly with your creditors on these loans.

» MORE: How to negotiate credit card debt

How to choose a debt relief company

If you decide to work with a debt relief company, you’ll get a free consultation where an advisor will review your finances and suggest a plan to help you get out of debt.

You shouldn’t be asked to pay fees before receiving a service. If a company demands fees upfront, avoid doing business with it and consider reporting the issue to the Federal Trade Commission (FTC) or the Consumer Financial Protection Bureau (CFPB).

A few other things to consider if you’re looking into debt relief are:

• Fee structure: With a DMP, you’ll pay an enrollment fee, followed by a monthly fee (a maximum of $75 each). With a debt settlement plan, you’ll typically pay a fee once an agreement is reached with your lender (e.g., 15% to 25% of the original debt).
• Payment amounts: You’ll pay off everything you owe under a DMP, but your lender might agree to a reduced interest rate or lower monthly payment. A debt settlement plan aims to pay your creditors less than you owe (e.g., 10% to 50% of your original balance).
• Program length: Once a settlement is reached, you’ll often have three to five years to pay off the agreed-upon balance. You’ll typically make monthly payments to the debt relief company, which will distribute the funds to your creditor.
• Credit score impact: Since you’re paying off everything with a DMP, your credit score will often improve over time. With debt settlement, the forgiven debt (the amount your creditor wrote off) is viewed negatively in your credit report, indicating you didn’t repay your loan as agreed.
• What happens if you don’t pay: If you don’t make the agreed-upon payments, the creditor may void the agreement. If you don’t think you can follow through with the plan, you’ll be better off financially if you don’t sign up.
• What it takes to reach an agreement: With debt settlement, there’s no guarantee the company will successfully negotiate an agreement with your creditors. If they don’t, you must be prepared to seek alternative debt relief.
• Tax implications: You may have to pay income taxes on forgiven debt. Consulting with a tax expert before proceeding with a plan is a good idea.

How to avoid debt relief scams

While there are legitimate debt relief companies, debt relief scams are something all consumers should be aware of. Some common red flags of debt relief scams include:

You can report a debt relief scam to the FTC or CFPB.

• Charging upfront fees
• Guaranteeing debt will be reduced or paid off
• Contacting you first
• Instructing you to stop communicating with your creditors

If you come across a debt relief program that seems like a scam, consider filing a report of potential fraud with the FTC or CFPB.

Make sure you always read the fine print before signing up for any services to understand exactly what you’re getting into and what the costs will be. Debt relief scams often use high-pressure sales tactics to rush you into a decision before you’ve had time to research. Taking a step back to compare options can help you avoid scams and find a reputable company.

If something doesn’t feel right, consider meeting with a financial advisor who can help you evaluate your options.

» MORE: How do debt relief companies work?

Alternatives to debt relief

If you need help repaying your debt, there are other options you can consider besides debt relief. In most cases, these alternatives will lead to credit score improvements. Plus, the costs are typically much less.

• Credit counseling: Many reputable nonprofit credit counseling agencies will review your finances, provide financial advice and offer financial education for free. The best credit counselors will teach you how to manage your finances independently. They may also offer a DMP if it can help you avoid bankruptcy, repay your debt more quickly or lower your borrowing costs.

  By learning to manage your finances, you’ll be better equipped to make sound financial decisions for the rest of your life. Plus, credit counseling may lead to eventual improvements in your credit score, especially if you always make your payments on time and pay off or reduce your revolving debt balances (e.g., your credit cards).

  Credit counseling is often a good option even if you’re in severe financial trouble and can’t afford your payments. Many credit counseling agencies also offer bankruptcy counseling, which you’ll need to complete before you file for bankruptcy. Plus, some offer housing counseling to help you avoid foreclosure or advise you on housing options (e.g., renting versus buying).

• Debt consolidation: Another alternative you might consider is getting a debt consolidation loan. This is a good option for individuals who want to lower their payments or interest rates and pay off their debt in a fixed amount of time. With a debt consolidation loan, you can refinance your unsecured debt into a single loan with a fixed monthly payment.

  You’ll typically repay a debt consolidation loan in no more than three to seven years with a fixed interest rate. Your monthly payment and interest rate will never change, so your payments are predictable. Plus, interest rates on debt consolidation loans are usually much lower than those on high-interest credit cards, which can reduce your overall borrowing costs.

  If you can’t afford to make the monthly payment on a debt consolidation loan, you may not qualify. Also, while even people with bad credit may be able to get a debt consolidation loan, the better your credit score, the better the interest rate you’ll receive.

» MORE: What debt should be paid off first?

FAQ

Is debt relief worth it?

While the phrase debt relief is often used to mean debt settlement — a type of debt relief offered by for-profit companies — another type of debt relief you can get that’s typically more affordable and less hurtful to your credit is a DMP from a nonprofit credit counselor.

The goal of debt settlement is to pay your creditors less than you owe, which is why it often hurts your credit for a long time. In contrast, with a DMP, you’ll repay your full principal balance, typically at a lower interest rate or with reduced fees. This type of debt relief can lead to credit score improvements over time, so it’s preferable to debt settlement.

Since debt management is often better for your credit and may cost less than debt settlement, most of the companies included on our list are nonprofit credit counselors that offer DMPs. They are all well established with no recent legal actions against them, and they belong to reputable trade organizations.

Methodology

To make our top picks for best debt relief companies, we collect 24 individual data points from 36 well-known companies offering various types of debt relief services. We then compared the features of the companies, including:

• Types of debt serviced: We considered the types of debts a debt relief company would work with, giving higher consideration to those who work with more than credit card debt (e.g., medical debt, payday loans or personal loans).
• Rates and fees: We gave preference to companies with clear rates and easy-to-access information about fees, including money-back guarantees and cancellation policies.
• Availability: Companies that are available to customers in all 50 states were given more consideration for top picks, but we didn’t exclude those with limited availability (based on other criteria).
• Accreditations: Since industry accreditations are crucial to a company’s legitimacy, we only considered companies with at least one professional accreditation, and more weight was given to those companies with more than one.
• Debt minimums: More preference was given to companies that had lower debt minimum requirements ($5,000 and below), but we didn’t exclude companies requiring a higher minimum if they excelled in other areas.

Since customer feedback is a critical indicator when evaluating companies, this was an important consideration when selecting our top picks. For companies on our list without ConsumerAffairs ratings, we considered other variables that made them strong candidates for debt relief.