Best Debt Relief Companies

Compare top debt relief companies

Buyers guide to debt relief

Debt is money you borrow from a lender, usually with added interest. If you're struggling with unsecured debt, debt relief may mean anything from a direct hardship arrangement with a creditor to a nonprofit debt management plan (DMP) or, in some cases, debt settlement.

The best option depends on your type of debt, how far behind you are, whether you can continue making payments and how much credit damage you can absorb. Debt relief can take time, and programs often take 24 to 48 months to complete.

What is a debt relief company?

A debt relief company helps consumers resolve their debt through one or more approaches. It may help set up a debt management plan that repays the full principal balance under revised terms, or negotiate with your lender to settle for less than you owe. As a last resort, the company might suggest filing for bankruptcy.

Debt relief companies can typically help with unsecured debt like:

• Credit card balances

• Personal loans

• Private student loans

• Deficiency balances on prior repossessions (for example, the remaining balance on an auto loan after a repossessed vehicle is sold)

• Medical bills

• Other past-due bills turned over to collections

Debt settlement is usually not a practical solution for secured debts like mortgages and 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 reputable debt relief company, you'll start with a free consultation with an advisor who will review your finances and suggest a plan to help you get out of debt.

Ask these questions before choosing a provider:

• What type of program is this? Ask whether it is debt settlement, credit counseling, a debt management plan, debt consolidation or another service. Those options work differently and carry different risks.

• What's the fee structure? Ask for the fee structure in writing, including whether fees are based on enrolled debt, settled debt, savings or monthly service. Fees, terms and creditor participation vary by provider, debt and state.

• How long is the program? 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.

• How will this affect my credit? 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 happens if a creditor doesn't settle? Debt settlement is not guaranteed. Ask how the company handles accounts that decline an offer, whether you remain responsible for the full balance and whether it provides legal services or only a referral.

• Will there be tax consequences? You'll likely have to pay income taxes on forgiven debt unless an IRS exception or exclusion applies. Consult a tax expert before proceeding with a plan.

How to avoid debt relief scams

While legitimate debt relief companies exist, consumers should still watch for debt relief scams. Some common red flags of debt relief scams include:

• Charging upfront fees

• Guaranteeing debt will be reduced or eliminated

• Pressuring you to sign immediately or discouraging you from reading the contract

• Asking you to pay by gift card, wire transfer, cryptocurrency or another hard-to-reverse payment method

• Instructing you to stop communicating with your creditors

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, meet 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, you also have other options. For smaller balances, these alternatives may help preserve your credit score and avoid settlement fees.

No one option is automatically better for everyone. Consider your income, budget, debt type, credit profile and how urgently you need relief before deciding.

DIY debt relief

Before hiring a company, call your creditors directly and explain what's changed with your finances. You may be able to negotiate a hardship program, a lower interest rate, reduced minimum payments or a similar option.

This can be a great option when the debt is relatively simple, and you are comfortable handling the negotiation yourself. But understand that creditors are not required to accept an offer, and a settlement for less than you owe can still harm credit and create a potential tax obligation.

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. Credit counseling may eventually improve your credit score, especially if you make payments on time and pay off or reduce your revolving debt balances, like 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 (like renting versus buying).

Debt consolidation

Another option is a debt consolidation loan where you refinance your unsecured debt into a single loan with a fixed monthly payment. That may make sense if you qualify for an interest rate lower than your existing debt and can afford the new payment through the full loan term.

Consolidation does not erase debt; it changes how and when you repay it. Compare the annual percentage rate (APR), origination fee, term, total of payments and any prepayment penalty before you move forward.

» 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.