Best Debt Relief Programs
The best debt settlement companies work with you to create a plan to reduce and pay off your debt. If you're struggling with the amount you owe, working with a debt settlement company can be the first step towards putting your financial life back together.
Since 2010, the Federal Trade Commission has prevented debt settlement companies from charging a fee before they settle your debt. Even with the rules in place, it can be tough to know who you can trust. I've looked at several companies closely and reviewed the best debt relief programs.
What is a Debt Settlement Program?
Best Debt Settlement Companies
The average person seeking debt settlement has more than $30,000 worth of debt, spread out over six accounts.
Debt is a very common thing. According to a report from Fox Business, the average US household had $90,000 in debt in 2016. That debt includes student loans, car loans, mortgages, and credit cards. The average credit card debt for US households was $15,762 per house.
Debt comes in two types. 'Good debt' is a result of buying a house or receiving the education you need to get a higher paying job. Credit card debt, auto loans, and personal loans are usually considered 'bad debt.' They usually have high-interest rates and are used to buy items that lose value over time.
The best debt settlement companies typically focus on helping you when your 'bad debts' are too much to handle. According to the New York Times, the average person seeking debt settlement has more than $30,000 worth of debt, spread out over six accounts.
When you work with reputable debt settlement companies, the company negotiates with your creditors on your behalf. They and your creditors agree on a lump sum amount that will pay off your debt.
To get the lump sum you make small monthly payments to the debt settlement company. The company should then put those payments in an account. Once you've made enough payments to cover the lump sum amount agreed, the settlement company transfers the payment to your creditors.
Best Debt Settlement Companies: What to Consider
When you look at the best debt settlement companies, keep an eye out for the following:
- High BBB Rating - The Better Business Bureau rates institutions on a variety of factors including customer satisfaction, business operations, and compliance with legal regulations.
- Fees Noted Upfront - Any fees should be addressed upfront. If you're not provided this information automatically, ask for the terms and agreements in writing.
- Affiliations - These indicate an organization's certifications and involvement in other debt related sectors.
- Customer Support - Telephone or email support for questions and inquiries.
- Consultation - A free consultation prior to paying any type of enrollment fee.
What the Best Debt Settlement Companies Offer
Not all debt settlement companies are created equal. In fact, the FTC warns that there are several so-called debt settlement companies out there that are little more than scams.
Knowing what to look for in the best debt settlement companies will help you make the right choice to avoid losing money or making your credit situation even worse.
You not only want to work with a company that promises to reduce your debt, you want to work with a company that actually will reduce your debt.
It's one thing for a debt settlement company to say that it will help you or to promise the lowest rates in the industry. It's another thing for an outside, unbiased company to give that debt settlement company its stamp of approval.
The best debt settlement companies are accredited by companies such as the American Fair Credit Council, the Better Business Bureau (BBB) and the International Association of Professional Debt Arbitrators.
Not everyone is dealing with the same type of debt or the same amount of debt. The best debt settlement company will be flexible enough to work with you and your debt, even if you don't fit into a particular mold.
Pay particular attention to the minimum debt requirement of the company. A few companies will only work with you if you are more than $10,000 in debt, for example. Some companies only work with customers who have credit card debt. Ideally, you want a company that helps with a variety of unsecured debts.
3. Cost Savings
Although you might be happy just to find a solution to your debt problems, the best debt settlement companies will also help you save money compared to what you would pay over the long term.
The company should be able to negotiate a lump sum payment that's lower than what you would pay if you spaced your payment out over a longer period of time.
4. Reasonable Schedule
Debt settlement is meant to provide you with some relief. But, you won't get that relief if you feel as though you need to make huge monthly payments to pay off the amount owed within a year or less.
To avoid running into trouble with your debt settlement plan, make sure it follows a reasonable schedule. A payment timeline of anywhere from two-to-five years is usually reasonable and doable for the average person.
Before you sign on to work with a debt settlement company, you want to make sure you fully understand what it can do for you, where it's legally allowed to operate, and what fees it will charge you.
Under the FTC's rules, companies can't charge you before they've done anything to help you. But, as CNN reported, some companies have found ways to work around the rules.
Along with knowing when the company can charge you, it's important to know what you'll be charged. If you have to pay a hefty fee to get out of debt with help, it might not be worth it.
The Best Debt Settlement Companies
National Debt Relief Review
- Online budget calculator
- Creditor collection call log
- Array of online tools and resources
- No out-of-pocket fee
- Phone, email, live chat
- May be liable for entire balance
- Minimum $7,500 in debt to qualify
National Debt Relief (NDR) has been operating since 2007 and has been accredited by the Better Business Bureau since 2013. It's at the forefront of the debt management sector and offer debt settlement, consolidation and other services to reduce and eliminate your debt.
After enrolling, you'll be instructed to create an account in which you deposit a fixed amount each month. At that point, NDR will begin to negotiate a settlement with your creditors.
When your lenders agree on an amount, the money in the account will be used to pay off your debt and a portion will also be used to pay for the company's services. The assessed fee is based on your income, degree of debt, and several other factors.
I found National Debt Relief to be very upfront about the fees it charges, what you need to participate in, and what you can expect to save over other debt payment options. For example, the fee is usually 20% and you can typically expect to save about 30% off the total cost of your debt.
National Debt Relief is an accredited member of the American Fair Credit Council (AFCC) and International Association of Professional Debt Arbitrators (IAPDA). These organizations have strict regulations and require their members to act in accordance with all federal and state regulations regarding debt settlement.
National Debt Relief is also upfront about the potential pitfalls of settling and offers information and other options, which is a refreshing trait when it comes to debt settlement companies.
The biggest drawback about this company is that they require customers to have at least $7,500 in unsecured debt. Unsecured debt includes things like credit cards, personal loans, medical bills, collections, repossessions, and business debts. NDR is very clear that they cannot settle any secured debts like lawsuits, back taxes, utility bills, student loans, mortgages or home loans.
Although National Debt Relief can't make any guarantees by law, customers typically see results within 24 and 48 months of working with them. What's more, the company features a call log to record any attempts made by your creditors to contact you. Once you record the details of calls or letters, National Debt Relief will use the information to negotiate your settlement. It's also a clever way to keep track of any harassing calls that may be infringing on your personal rights. By documenting these instances, you'll be in a more desirable position to take action.
On the whole, National Debt Relief is a top notch debt settlement firm. They've received 5 stars from Top Consumer Reviews and are adamant that they never charge upfront or ongoing fees for their services.
Freedom Debt Relief Review
- A-rating by the Better Business Bureau
- Easy website navigation
- Free consultation
- Individual advisor
- Online registration/management
- No live chat
- No IAPDA affiliation
Freedom Debt Relief offers the basic services you would expect with a debt settlement firm-online registration, personal advisor, free consultation, telephone-but has received some unfavorable reviews on the web.
That said, it's tough to find a debt settlement company that doesn't have some unsatisfied customers. It's simply the nature of the beast.
Freedom Debt Relief has a well structured and easy to navigate website. Access to their contact information, blog, and service charges are just a click away, which is a big plus. Since many other competitors have difficult to navigate websites or websites with scant information, Freedom Debt Relief's site works in its favor.
The settlement process with Freedom Debt Relief is simple.You'll be instructed to set up a trust where you'll deposit a specified amount per month. Meanwhile, the staff at FDR will negotiate a lower settlement with your creditors.
According to the company's site, they get average settlements of 42 cents on the dollar. What's interesting is that they're one of the few companies to make a specific claim like this.
The biggest advantages about working with Freedom Debt Relief is that you'll only be charged fees on resolved debt. The company acts as your credit advocate, and there's the potential to reduce the total amount of debt you owe.
In terms of industry ratings, Bestcovery.com rates Freedom Debt Relief in the top 5, Consumeraffairs.com gives them 3.75/5.0 points and they have some stellar reviews on Yelp! Furthermore, they boast an A rating from the Better Business Bureau.
CuraDebt Debt Settlement Review
- Free consultation
- Personal debt negotiator
- Online registration/management
- Money-back guarantee
- Blog resource
- Not available in 13 states
CuraDebt was founded in 2000 with the intention to provide financial solutions within the debt relief sector. In terms of debt settlement, CuraDebt's in-house program costs 20% of the total entered debt. It also offers an average savings of 40%.
CuraDebt has a money-back guarantee to serve its customers. The company is in good standing with The American Fair Credit Council (AFCC) and the International Association of Professional Debt Arbitrators.
As far as CuraDebt's website and support center goes they do offer telephone, email, and live chat services. It also has a credit restoration program to help those who complete their debt settlement program.
The last major point to take into consideration is its online resources. Unlike National Debt Relief, CuraDebt doesn't have a trove of financial tools on its website but it does sponsor a blog with valid financial advice.
What really stands out about CuraDebt debt settlement program is its low service fee and the assortment of awards with consumer ranking groups.
Accredited Debt Relief Review
- Available in 49 states
- Accredited by BBB, AFCC, and IAPDA
- No fees until settlement
- Free consultation
- Lower than average savings
- Minimum debt of $7,500
Accredited Debt Relief is able to provide debt settlement services to customers in 49 states. Once you sign up for the program, the company begins to negotiate with your creditors. Often,the negotiations begin about a week after you start the program. It usually takes between six and nine months for an agreement to be reached.
The company charges fees that are around the average for the industry. You only pay fees at the end of the program, not upfront. Although working with Accredited debt relief will save you money, the average savings of 25% is a bit lower than other companies' average.
Accredited Debt Relief offers more than just debt settlement to customers. It also provides credit counseling, debt consolidation and assistance with bankruptcy.
- BBB and AFCC accreditation
- Telephone & email support
- No upfront fees
- No live chat
- Website has some resources, but is skimpy on information
- $10,000 debt minimum
If you have a significant amount of unsecured debt, ClearOne can help you settle it. The company has helped clear $1 billion worth of debt since it started in 2007.
It only works with consumers who have at least $10,000 in debt, so it is not an option for people who owe a few thousand or so. Although the company is clear that it doesn't charge fees upfront, they doesn't give you any idea of what their typical fees are.
ClearOne also doesn't provide much information about what the average savings is for people who have worked the company. It's also not upfront about which states it operates in.
If you have a lot of debt, ClearOne might be a good option for you. The company is accredited by the AFCC and BBB. It offers free consultations, so it can be worth it to reach out and see what ClearOne can do for you.
Protect Yourself from Scams with the Best Debt Relief Companies
The debt settlement industry has vastly improved in recent years, ever since the FTC put a number of rules in place to protect consumers. But a few bad apples remain.
Luckily, there are ways you can protect yourself from debt settlement scams:
- Only work with companies you contact. If a debt settlement company reaches out to you about your debt, that should raise red flags. The best companies don't have to hunt for customers, as their reputations make customers come to them.
- Be wary of companies that make promises. If the company promises something that's too good to be true, it is. No company can guarantee to solve all your debt problems. If one does, run the other way.
- Don't pay fees upfront. Companies can't legally charge you anything before they've done any work. But that doesn't stop the scammers.
- Research any company before you agree to work with it. Read reviews, check out the company's profile on the BBB or if it's accredited. You can also check your state's consumer protection agency to see if there have been any complaints against the company.
- Get all the details. Get the full scoop before you agree to work with any debt settlement company. How will the company help you, what exactly will it do, what is your responsibility, and what effect will the program have on your credit?
What's Behind the Guarantee?
In general, be wary of any debt settlement service which guarantees results without shedding light on the risks associated with the process. Check the fine print and the terms of the agreement so that if the company is unable to come to an agreement with your creditors then you won't be liable for any fees. Also, keep in mind that your credit score will drop when you opt for debt settlement but in general it does go back up. Your primary goal in all this should be to eliminate your debt without filing for bankruptcy.
Alternatives to the Best Debt Relief Companies
The best debt settlement companies can help some consumers, but they can't help everyone. Depending on the type of debt you have, the amount of debt and other circumstances, a number of other debt relief options might be more appropriate for you.
1. Debt Consolidation
When you consolidate debt, you simply take out one larger loan and use the principal to pay off several smaller debts. Instead of making several payments per month, you make one payment towards the consolidation loan.
Often, debt consolidation results in a lower interest rate than what you were paying on your other loans. It also streamlines the loan repayment process, since you're making just one payment a month.
The average interest rate on credit cards was 13.76 percent in 2016, according to the Federal Reserve. Meanwhile, the average interest rate on a personal loan was lower, at 9.64 percent. If you simply take out a personal loan and use it to pay off your credit cards, you can end up saving money.
Although you might get a lower interest rate on your new loan and pay less each month, the term for the consolidation loan is usually longer. That means you'll pay more out of pocket over the long run.
You can consolidate your debts on your own by taking out a bigger loan or work with a company that specializes in debt consolidation.
2. Credit Counseling
Credit counseling won't get you a lower interest rate or better loan terms. But it can help you learn to manage your debt and money better so that you avoid getting in over your head financially in the future.
When you work with a credit counselor, you can learn to create a budget and live within your means, instead of turning to debt.
3. Debt Management Program
A debt management program is somewhat similar to debt settlement. You work with a company that negotiates with your creditors. But, instead of negotiating a lump sum payment, the company works with your creditors and agrees to a monthly payment amount and new loan terms.
You make monthly payments to the debt management company, who is then responsible for paying your creditors.
Bankruptcy is usually the last resort, for when you have a lot of debt that you just can't pay back with your current income. Although it does stay on your credit report for at least seven years, for some people, bankruptcy can be the better option. It definitely wipes out certain types of debt, allowing you to get a fresh start almost immediately.
Filing for bankruptcy isn't common, but it might be more common than you think. In 2016, the US Courts reported 793,932 non-business bankruptcies, down from the peak of 1.6 million in 2010.
Best Debt Relief Programs Recap
Debt settlement is not an appropriate solution for everyone, there are no results guaranteed and a debt settlement company might not be able to come to an agreement with your creditors. That means you'd still be liable for repaying the entire amount you owe.
If you're going to work with one of the best debt settlement companies, read the fine print carefully. Make sure you understand what effect the settlement will have on your credit and what you'll actually save.
It might be that an option like debt consolidation or even bankruptcy is better for you. Before you decide which way to go, read my review of the best debt consolidation companies to learn more about what you can expect. If you need help fixing up your credit, check out my review of the best credit repair companies.